Buffett on Obama Bank Regulation Proposal & Goldman Sachs Investment

Buffett's primary solution to banking crisis: Make CEOs personally financially devastated if their bank needs government bailout. Proposes CEO and spouse forfeit entire net worth, including any CEO from previous 2 years. Argues current system allows CEOs worth $500M to leave with $50M - insufficient deterrent. Emphasizes CEO must be chief risk officer. Accepts that some banks will always be too big to fail but wants real consequences for leaders.

Discussion of Obama's proposal to limit proprietary trading at banks with deposits (Volcker Rule). Buffett notes difficulty defining and policing risk - mentions selling 23,000 derivative contracts he couldn't understand. On Glass-Steagall: wasn't unhappy when it existed, didn't champion its removal, but 'sometimes hard to put genie back in bottle.' Focus remains on personal CEO accountability over structural rules.

Buffett distinguishes between shareholder losses and CEO accountability. Shareholders of Citi, BofA, Fannie, Freddie, AIG lost 90-95% - clear moral hazard consequences for equity holders. But CEOs who created the problems walked away largely unscathed. Fannie/Freddie case study: Congress-created entities with Congressional supervision, 200-person oversight office, 100-page annual reports claiming 'fine and riskless' - total failure of regulatory approach.

Buffett's September 2008 $5B Goldman investment now worth $3B+ profit. Interviewer asks if he'll cash out given regulatory pressure. Buffett firm: 'not tempted at all' - will hold full 5 years or longer. Defends Goldman despite regulatory attacks, emphasizing investment banks fulfill 'enormous function in this world.' Predicts Goldman/Morgan Stanley might logically drop bank charters if Volcker Rule passes since banking is small part of their business.