Fiscal responsibility is necessary

Warren Buffett addressed Berkshire Hathaway shareholders Friday about company performance in 2008.’

In a comedic and witty way, Buffett simultaneously accepted responsibility and also blamed others.

Buffet’s company, Berkshire Hathaway, recorded its worst financial year since he took control in 1965.’

‘Though the path has not been smooth, our economic system has worked extraordinarily well over time. It has unleashed human potential as no other system has, and it will continue to do so,’ Buffet said in his letter. ‘For Berkshire Hathaway, investments fell from $90,343 per share to $77,793, a decrease caused by a decline in market prices, not by net sales of stocks or bonds.”

As bad as the economy may seem, Berkshire Hathaway has companies that seem impervious to dire market conditions. GEICO insurance seems to be one of them, with GEICO increasing productivity and sales in 2008.’

‘As we view GEICO’s current opportunities, (CEO Olza ‘Tony’ Nicely) and I feel like two hungry mosquitoes in a nudist camp. Juicy targets everywhere.’ Buffett said.

‘ Later in his letter, Buffett addressed the housing crisis.’

‘Commentary about the current housing crisis often ignores the crucial fact that most foreclosures do not occur because a house is worth less than its mortgage’ he said, describing so-called ‘upside-down’ loans. ‘Rather, foreclosures take place because borrowers can’t pay the monthly payment that they agreed to pay.”

Buffet describes homeowners who typically default these days as people who have made significant personal investments in their home and who simply cannot afford the payments.

The U.S.’s most successful investor goes on to characterize home investment as other than for eventual appreciation, resale and profit. He also advises against buying more home than one can afford.’

‘The home purchased ought to fit the income of the purchaser,’ Buffett said. ‘Home purchases should involve an honest-to-God down payment of at least 10 percent and monthly payments that can be comfortably handled by the borrower’s income. That income should be carefully verified.’

‘ What Buffett says is very accurate and also perfect advice for soon to be homeowners, and also for lenders.’

Should those lenders have been more careful to begin with, the country would likely not be in the current fiscal quagmire. ‘

Lori Whisenant, director of business law and ethics studies at C. T. Bauer College of Business discussed business ethics as taught at UH.’

‘As an MBA student in Bauer, students must uphold the Bauer Code of Ethics,’ Whisenant said.’ ‘For undergraduate students, GENB 4530 is designed to help students understand the challenges of creating and maintaining an ethical corporate climate.”

In 2005, Whisenant, with the assistance of other administrators and input from others on the Bauer staff, developed the Bauer Code of Ethics and Professional Conduct, known as the Bauer Code. This is the first code of ethics for the C. T. Bauer College of Business.’

Economics senior Kyle Randazzo said he realizes the economic situation and had his own opinion in regards to business ethics.’

‘A problem arises when globalization changes,’ he said. ‘U.S. national and international economic decisions must change as well if we expect to prosper as an entity.’

Political science and economic Fatima Maniar said corrupt business ethics are also responsible for the economic crisis. ‘

‘It’s hard to regulate and enforce business ethics. The level of importance a person places on enormous profits and money could determine how ethically they practice business ethics,’ she said.’

Good business ethics would have gone a long way to prevent this present financial debacle.’ Still, we have faced worse as a country, and triumphed.’ As Buffett told his stockholders, ‘America’s best days are still ahead.’

1 Comment

Leave a Comment