Thursday, September 25, 2014

Charlie Munger

Charles Thomas Munger (born January 1, 1924) is an American business magnate, lawyer, investor, and philanthropist. He is Vice-Chairman of Berkshire Hathaway Corporation, the diversified investment corporation chaired byWarren Buffett; in this capacity, Buffett describes Munger as "my partner." Munger served as chairman of Wesco Financial Corporation from 1984 through 2011 (Wesco was approximately 80%-owned by Berkshire-Hathaway during that time). He is also the chairman of the Daily Journal Corporation, based in Los Angeles, California, US, and a director of Costco Wholesale Corporation.

Charlie Munger And The 2014 Daily Journal Annual Meeting - Part Two

Q. What do you think of Fannie Mae and Freddie Mac?

Munger: I have a peculiar attitude for a Republican. I think Fannie Mae and Freddie Mac, when they don’t go crazy making lousy loans in response to the demands of politicians, are serving the country pretty well, the way the system is now configured. The fact that we came into it by accident doesn’t mean that it isn’t a pretty good solution. Considering the crisis we had and the risks we faced, everybody behaved pretty well and the result is not awful.
Last time we loosened standards because everybody else was. The politicians hated them, and they couldn’t stand that everybody else was making money on the subprime loans. This was envy and it was stupid. There is nothing wrong with keeping your head when all about you are losing theirs — Kipling was right. Why couldn’t Fannie Mae say, we extend credit to people who deserve credit? Well, it’s not egalitarian enough – we want to shovel money at the people who were deprived. The trouble with that is the whole system blows up. What looks like hard-headedness is really soft-headedness. The whole world is better when you don’t reduce engineering standards in finance. We skipped a total disaster by a hair’s breadth. Partly because both Democrats and Republican administrations, both Congress and the President, made decisions that were pretty much exactly right and did it under terms of terrible pressure. I’m a big fan of the people who took us through the crisis. I’m not a big fan of the people who caused the crisis. Some of them deserve to be in the lowest circle of Hell – not that I have any power to put them there.
Q: But what about when the government stripped away the profits of these enterprises?
Munger: They were private corporations with a little bit of government image and they were insolvent at the time. I don’t think it was unjust. They had behaved terribly. If somebody asks you to do something that’s bad enough, you can give up your damn job rather than do it. Fannie Mae did not have to cave. It was run by people who were cavers by nature. They were just looking for a place to sell out for personal advantage. That’s what they did in life.
We want more people who say, “You’re my boss, and if that’s what you want to do, you’ll have to get a different errand boy. I’m not going to do it.” There ought to be way more of that. Elihu Root, probably the greatest cabinet officer we ever had, said one of my favorite comments: No man is fit to hold public office who isn’t perfectly willing to leave it at any time. Of course, he was the most famous lawyer in the world so he could immediately leave to success, whereas the other politicians, if they left, were nothing. The country would be better off if we had more people like Elihu Root making the decisions.

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