Clayton’s lending operation, though not damaged by the performance of its borrowers, is nevertheless threatened by an element of the credit crisis. Funders that have access to any sort of government guarantee – banks with FDIC-insured deposits, large entities with commercial paper now backed by the Federal Reserve, and others who are using imaginative methods (or lobbying skills) to come under the government’s umbrella – have money costs that are minimal. Conversely, highly-rated companies, such as Berkshire, are experiencing borrowing costs that, in relation to Treasury rates, are at record levels. Moreover, funds are abundant for the government-guaranteed borrower but often scarce for others, no matter how creditworthy they may be.Things like this are why I think bailouts are evil.
This unprecedented “spread” in the cost of money makes it unprofitable for any lender who doesn’t enjoy government-guaranteed funds to go up against those with a favored status. Government is determining the “haves” and “have-nots.” That is why companies are rushing to convert to bank holding companies, not a course feasible for Berkshire.
Though Berkshire’s credit is pristine – we are one of only seven AAA corporations in the country – our cost of borrowing is now far higher than competitors with shaky balance sheets but government backing. At the moment, it is much better to be a financial cripple with a government guarantee than a Gibraltar without one.
Bailouts
-
Paging
madlori (and anyone who knows her)
An interesting thing just happened on Facebook chat. Lori Summers [2:29:44] Got my message ? Brent Royal-Gordon [2:33:45] I did. Lori Summers…
-
guest post
kate is the best better than the rest the best the best haikus about kate: kate's my favourite i want to lick her ballsack it would taste so…
-
Practice
This December, I will have been practicing programming seriously for ten years. That will mark the tenth anniversary of me starting to learn Perl. I…
- Post a new comment
- 0 comments
- Post a new comment
- 0 comments