Regular readers of this site know that I'm not shy about criticizing Warren Buffett when I think he deserves it. But on two items recently in the news, I think his critics are on shaky ground.
The first is a Bloomberg News article headlined "Warren Buffett Is Sending Mixed Messages on Green Energy." It faults a Berkshire Hathaway-owned electric company, NV Energy, for opposing increased use of "net metering," a program whereby individuals with rooftop solar panels can sell the energy back to the utility. Bloomberg quotes a spokesman for NV Energy saying that while the company supports solar energy, raising the net-metering cap "increases costs to all customers and we oppose putting upward pressure on rates." Imagine if your state passed a law requiring your local gas station to accept home-brewed alcohol that individuals bring in in small containers and mix it with gasoline to fuel cars, a la ethanol. Such a law would raise gas prices for everyone because of the hassle involved. Good for Mr. Buffett for fighting this one, though, as the article points out, it also advances Berkshire's economic interest.
The second cheap shot against Mr. Buffett came in a New York Times editorial accusing a Berkshire subsidiary, Clayton Homes, of "predatory lending" in the sales of mobile homes. The editorial claims "loans by Clayton's two lenders had failure rates of 33 percent and 26 percent," a claim Clayton denies. The Times claims "the real victims" are "the mostly rural, older and hard-pressed buyers of mobile homes...who need protection from the high-pressure sales tactics and excessive costs of doing business with Clayton." Yet the New York Times itself reported in December — in a piece that stands uncorrected — that "what distinguished Clayton Homes was that its financing division, unlike that of competitors, did not engage in predatory lending or exploit its customers' naiveté."
In addition to contradicting itself, the Times attack on Clayton Homes ignores the possibility that the stereotypical rural rubes the paper's editorialists are condescending to would be worse off if Clayton tightened its credit practices to the point where they were denied loans in the first place. They might be homeless, or renters unable to build home equity or take advantage of the mortgage-interest tax deduction. Just because some loan recipients are going to lose their jobs, get divorced, become disabled, and default on their mortgages is no reason to deny all such applicants loans if the overall business is profitable for Berkshire. In the name of "protecting" these customers, the Times is going to wind up denying them financing for housing.
