Skip to main content

By Jeff Nielson of

There are numerous disgusting episodes associated with Wall Street's unprecedented, coordinated crime-wave -- based atop the U.S. housing bubble, which was created with the full cooperation of the

Federal Reserve

and the U.S. government. However, few aspects are as disappointing as the rapid erosion of Warren Buffett's reputation.

Of course we are all familiar with Buffett's extraordinary philanthropy. No matter what else Buffett does, many will always remember him for that. Indeed, only a few years ago, Buffett's "halo" appeared to be Teflon-coated -- as he seemed immune to the naked greed and predatory instincts that characterize most of those who rise to the top in the business world.

Those days are long gone. The stellar reputation that the Oracle of Omaha earned for himself over a period of decades has now been largely squandered in a few short years.

It was in 2003 that Buffett made his now legendary assessment of the derivatives market: Wall Street's $1.5 quadrillion unregulated, private casino. Said Buffett, the derivatives market posed "a mega-catastrophic risk" to the entire U.S. economy, as it was filled with "financial weapons of mass destruction."

Buffett went on to add "derivatives generate reported earnings that are often wildly overstated and based on estimates whose inaccuracy may not be exposed

emphasis mine for many years." Translation: the derivatives market was a cesspool for fraud. He further stated that the creators of some of these derivatives were "madmen."

Flash-forward seven years, and now the only time Buffett chooses to talk about the derivatives market is when he is announcing yet more


on his derivatives "investments." The same Warren Buffett who warned people away from these "financial weapons of mass destruction," in a fraud-filled market created by "madmen" couldn't resist the urge to gamble in Wall Street's crooked casino -- with shareholder dollars.

If this was the extent of the guilt that Buffett had to bear, then many would be quite happy to look the other way, conceding that after the fabulous sums of money he used

to earn

for his investors that he was entitled to a little "fun" (at shareholder expense). Unfortunately, this is only the beginning rather than the end of Buffett's fall from grace.

As various Wall Street oligarchs have been caught "red-handed" in any and every form of fraud imaginable, Buffett has had almost no critical words of any kind for his

Scroll to Continue

TheStreet Recommends


in this sector. Indeed, there is arguably no other single individual who has done more to try to prop up the oligarchs than Buffett (outside of the banker-servants in the U.S. government).

He has been a large investor in many of these fraud-factories, and still considers

Wells Fargo


to be one of his most-prized holdings. None of these other "investments" was as singularly noteworthy as the $5 billion (of shareholder money) he advanced to

Goldman Sachs


during the heart of the Crash of '08.

To quote one Wall Street blogger, Goldman Sachs "can't wait to get Buffett out of its hair," because it has already paid out $1 billion in dividends on those preferred shares. Now recall how ex-Goldman Sachs CEO Hank Paulson turned



into the world's biggest "slush fund" (while Treasury secretary), specifically so he could funnel $13 billion of taxpayer money into the coffers of Goldman Sachs.

Regular readers will recall that the money AIG "owed" to Goldman Sachs was the product of yet another Goldman Sachs scam -- where it duped a couple of chumps at AIG into "insuring" the worst housing-sector junk that the "shorts" at Goldman Sachs could find, and then they ruthlessly "shorted" those assets to force massive payouts by AIG.

How massive? As we saw in a lawsuit between




Morgan Stanley


, even after Morgan Stanley liquidated the "collateral," which supposedly backed this credit-default swap, it was facing a payout of 300-1.

Despite the gigantic windfall "profits" that Goldman Sachs stood to gain from its economic pillaging of AIG, Paulson ordered AIG to pay Goldman Sachs 100 cents on the dollar for those schemes, something that would have never occurred in any private settlement or bankruptcy proceeding. Wall Street collected 100% from AIG (out of taxpayer pockets), and now they have paid Buffett his "cut" of these ill-gotten gains.

Further tarnishing Buffett's reputation is his personal choice to act as "front man" and apologist for Wells Fargo. Hiding behind Buffett's halo, Wells Fargo was the


major bank that never put even a temporary halt on its foreclosure-mills and "defective" foreclosure paperwork.

Like all the Wall Street banks, Wells Fargo pretends it has "done nothing improper." Like all Wall Street banks, Wells Fargo has engaged in "robo-signings."

In the case of Wells Fargo, I just came across this anecdote from Matt Taibbi's latest piece in Rolling Stone:

It's not hard to find fraud in the case. For starters, the assignment of mortgage is autographed by a notorious robo-signer - John Kennerty, who gave a deposition this summer admitting that he signed as many as 150 documents a day for Wells Fargo close to 4,000 acts of fraud per month. In Cooper's case, the document with Kennerty's signature on it places the date on which Wells Fargo obtained the mortgage as May 5th, 2010. The trouble is, the bank bought the loan from Wachovia - a bank that went out of business in 2008. All of which is interesting, because in her file presented in court, in official proceedings it states that Wells Fargo sued Cooper for foreclosure on February 22nd, 2010. In other words, the bank foreclosed on Cooper three months before it obtained her mortgage from a non-existent company emphasis mine.

Making these foreclosures many times more reprehensible, many homeowners who were current on their payments but applying for a "mortgage modification" were told that they would only be "eligible" for this program


they became delinquent on their payments first (generally for three consecutive months).

Then, after counseling these homeowners to not make their payments, not only were the homeowners never given mortgage modifications, but the same homeowners suddenly found themselves in foreclosure proceedings -- with over 90% of such cases being rubber-stamped by judges, where the homeowner is never even given the chance to present evidence.

Buffett has not had a single harsh word to say about this massive, orchestrated foreclosure issue but he did find the time to write an

open letter to the U.S. government

thanking it for "everything" the U.S. government did: propping up the bankrupt Wall Street oligarchs with

trillions of dollars of taxpayer money

and then doing everything possible to hide Wall Street's crime wave behind the protection of a cadre of corrupt "regulators," whose only mantra is "see no evil, hear no evil, speak no evil" about any Wall Street bank (or banker).

Leaving absolutely no doubt about where his allegiances lie, Buffett explicitly singled out Ben Bernanke, Hank Paulson, Tim-the-tax-cheat Geithner and Sheila Bair for personal praise --arguably the "Four Horsemen" of the U.S. housing-sector "Apocalypse." Sadly, Buffett appears quite content to flush his personal "legacy" down the toilet, happy to swap his stature as "American philanthropist" for that of just another Wall Street shill.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.