Banking system is headed for collapse

Warren Buffet committed $5 billion to Bank of America today. The stock opened up more than 20%.

Buffet’s commitment may be considered good news, especially for shareholders of Bank of America. Ultimately, it is probably bad news for all of us, including B of A.

In my opinion, it is merely another confirmation that our banking system is headed for collapse. It indicates that more Federal funds (your taxes) are headed for the banking system. Buffet would not have made this commitment without assurances from government that they would backstop him.

In Tyler Durden’s opinion:

Goldman bailout part 2 is here. And so the Octogenarian of Omaha doubles down on another taxpayer bailout.At least we can put aside all the lies that Bank of America did not need capital. It needed capital: $5 billion of it. It also confirmed it was completely locked out of both debt and equity public capital markets – the bank’s only recourse was a private raise with a crony capitalist who is once again doubling down on the global ponzi.

Buffet’s play was not made without knowledge (and/or commitments from the government) as to what to expect. He is part of the ruling class, regardless of the Omaha folksiness. He knows how to get his bread buttered.

Is Mr. Buffet getting senile? His views on taxation are bizarre and overexposed but he still appears sharp in interviews.  He backed President Obama (or at least was used by President Obama during the campaign), but has showed enough sense to disappear from political view after the election.

Is it possible he has major needs elsewhere where future government assistance will be required? Possibly, but it is difficult to tell. He knows how to use Washington to his advantage.

There are many questions that could be asked. I don’t know all the questions or most of the answers; nor do I think they matter. The issue comes down to this — is government capable of bailing out the banking system? If the answer to that question is No, the Mr. Buffet has likely made a terrible error with his involvement with B of A.

Big government types always assume that government is big enough to solve (or, more properly termed, “cover up”) any problem. It is not.  The banking system will be the Waterloo of this concept. The banking system is insolvent. In my opinion, the amount of money necessary to solve the problem exceeds government’s resources. This cancerous growth on the economy will eventually kill the economy and the government.

Buffet’s input of funds indicates he either needs support down the road or does not understand that “Too Big to Fail” is morphing into “Too Big To Bail.”