In his 2008 Letter to Shareholders, Berkshire Chairman Warren Buffet notes how the government’s policies are making it difficult for the best corporations to borrow while making it relatively easy for the “financial cripple”:
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.
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.
This represents the essence of altruism in theory and in practice. In theory, when the able are forced to sacrifice for the unearned benefit of the unable – when the “need” of the borrower is the only standard by which to determine who is to be the recipients of sacrifice, a monumental inversion of justice must occur. In practice, the most irresponsible are encouraged to continue and expand their activities while the most responsible are impeded.