Warren Buffett "is a hedge fund manager" who built his fortune in part by charging early investors 25% of profits above 6% in his fund, the Pragmatic Capitalist writes. The fee structure is interesting in light of Mr. Buffett's October 6, 2008 letter to then-Treasury secretary Henry Paulson offering to invest $500 million of Berkshire Hathaway's money and $100 million of his own money (which he described as "about 20% of my net worth outside of my Berkshire holdings, which as you know are promised to charity) in a partnership with the government to buy up distressed assets. In the letter, Mr. Buffett proposed to "bar hedge funds or other vehicles in which management receives an override of profits" from investing in the deal, arguing, "you would want to have investors receiving all of the profits available instead of splitting them with managers taking fat overrides." The letter, which addresses the Treasury secretary as "Hank," says that "Bill, Mohamed, Lloyd and I -- and I'm sure a myriad of others -- are ready to help." The references are to Bill Gross and Mohamed El-Erian of Pimco and to Lloyd Blankfein of Goldman Sachs. Now Mr. Buffett is helping Mr. Paulson promote his book. Mr. Gross and Mr. Buffett also gave Mr. Paulson cover for seizing Fannie Mae -- Mr. Gross, in particular, was cheering it on, but so was Mr. Buffett. Had "Hank" accepted Mr. Buffett's proposed deal, Mr. Buffett might have ended up with the 72% return the Credit Suisse guys got on their "toxic" assets. What an operator! One is torn between admiring it and being disgusted by it.

The Economist has an article on Microsoft's former chief technology officer, Nathan Myhrvold, and his idea to solves what he sees as a lack of inventiveness in America:

The root of the problem, as he sees it, is the current reliance on a "charity model" of funding research—in particular, universities' dependence on government grants. The solution, he argues in his Harvard Business Review article, "The Big Idea: Funding Eureka", would be a world in which inventors are encouraged to invent by the presence of investment funds that compete to buy their intellectual property and sell it on—perhaps bundled with other patents—to buyers who know how to put it to good use....he foresees it being dominated by fund-management firms, such as his own Intellectual Ventures, collectively constituting a new alternative asset class that he calls "invention capital".

My post on PIGS Without Jews has been officially classified as an anti-Semitic event by the government of Israel. Oy!

Here is what I wrote to the editors of that site:

Longtime Republican activist Grover Norquist, president of Americans for Tax Reform, has an article in today's Financial Times. In seeking to explain how the Republicans came back, Mr. Norquist may be getting a bit ahead of himself. The Republican takeover of the House of Representatives that he is predicting has not happened yet, after all. But he does make some interesting points about how the Republicans have recovered some ground politically. It's also fascinating to see the reaction in the comments from FT readers: "very sorry to see the FT give a platform to one of the right's most extreme ideologues"; "This is perhaps the most recklessly Republican article to appear on the FT since I've begun reading. I am actually ashamed...This is a terrible article that doesn't deserve to be printed on pink paper."

"We must reduce the epidemic of multiple births," an Associated Press article posted at Yahoo! News quotes a Belgian doctor as saying. It's a variation on the argument made by the New York Times back in October, and the same criticisms apply.

The American Treasury Department is getting set to designate Iran's central bank as a terrorist-supporting entity, my former New York Sun and Forward colleague Eli Lake reports. "The first target likely will be Iran's banks," he writes.

The Iranians should be worried. If the Treasury Department does half as much damage to Iran's banks as it did to Lehman Brothers, Bear Stearns, Fannie Mae, and AIG, there won't be much left.

Harvard University economics professor Kenneth Rogoff on China, according to a Bloomberg News report:

People say China "won't have a financial crisis because there's central planning, because there's a high savings rate, because there's a large pool of labor, blah blah," he added. "I say of course China will have a financial crisis one day."

When that crisis comes, it'll be interesting to see what the effects are on China's political stability and its system of Communist Party rule. Professor Rogoff doesn't get into the question, at least to judge by the Bloomberg report.

The Wall Street Journal has an editorial this morning about Senator Schumer and Rep. Chris Van Hollen's efforts to rewrite the law to try to get around the Supreme Court's pro-free-speech decision in Citizens United v. FEC. Contrast their approach to the comment of President Kennedy back in June of 1962 when asked by a reporter about the Supreme Court's decision in Engel v. Vitale, which banned states from requiring the recitation of an official prayer in schools. According to Richard Reeves' President Kennedy: Profile of Power, Kennedy responded by saying, "I think it is important for us if we are going to maintain our constitutional principle that we support the Supreme Court decisions even when we may not agree with them."

A bonus pool of "toxic assets" including commercial mortgaage backed securities returned 72% in 2009 for bankers at Credit Suisse, the Wall Street Journal reports. If those assets weren't so toxic in the end after all, what does it say about all the other supposedly "toxic" assets, the toxicity of which was used as a justification for government actions to seize parts of publicly traded companies in America? The Journal doesn't get into that question, but it's one that needs to be answered before buying in to the idea that Henry Paulson, Ben Bernanke, and Timothy Geithner are all heroes. One can credit them for the recovery of the "toxic" assets. But it's possible, too, that had government officials not made the statements and taken the actions they did, the value of the "toxic" assets may not have plunged so far in the first place.

On February 22, the Obama administration's Federal Deposit Insurance Corporation issued a press release marking "America Saves Week," urging Americans to save more money. Said the FDIC chairman, Sheila Bair, "One fundamental lesson of the financial crisis is that savings can help families withstand sudden changes in their economic well being." She went on, "I am pleased to see that people are saving more of their hard-earned money and building wealth. Having personal savings for an emergency fund or saving for a future expenditure, such as a college education, can make a big difference in avoiding other costly alternatives. ...It's my hope that Americans' increase in savings is the beginning of a long-term trend." On the same day, the White House announced President Obama's detailed health care plan, which would impose a new 2.9% tax on interest and dividends earned by households with incomes exceeding $200,000 for singles and $250,000 for married couples filing jointly. As Harvard economist and former Bush aide Greg Mankiw notes, those taxes would have the effect of "reducing the incentive for saving and investment." It's quite a feat to send out a press release urging Americans to save more money and on the same day propose to raise taxes on their savings.

This is from last week but still newsworthy given all the issues emerging with Henry Paulson's book On The Brink, which we reviewed here earlier: The former secretary of the Treasury now says he shouldn't have blamed the British for the failure of Lehman Brothers. "I shouldn't criticise them. I did, but I shouldn't have," is the way the Times of London quotes Mr. Paulson as putting it, in an article headlined "Paulson sorry he blamed UK for Lehman failure." Link via Felix Salmon.

The chairman of Sears Holdings Corporation, Edward Lampert, is out today with his annual letter, and it makes for some interesting reading. Mr. Lampert says he's been reading Thomas Sowell's book Intellectuals and Society, a book that was reviewed here back on January 4 but so far as I can tell hasn't rated a review from the New York Times or the Wall Street Journal. The beginning of the letter is about Sears, but further on it gets into some public policy and even philosophical issues of the sort that are often discussed here:

By now it's conventional wisdom in Washington that Republicans and Democrats can't agree on health care. Actually, the parties sometimes behave remarkably alike. Back on February 10, FutureOfCapitalism.com reported on the federal secretary of health and human services, Kathleen Sebelius, a Democrat, sending a letter to WellPoint's Anthem Blue Cross asking for an explanation of its rate increases in California. President Obama followed up with a video address on the issue. Today Senator Grassley, the top Republican on the Senate Finance Committee, sent Wellmark Blue Cross and Blue Shield, another insurance company, a letter about its plans to raise rates on Iowa customers. Said Mr. Grassley, "At a time of record unemployment rates and sluggish wage growth, I'm concerned that a rate increase of this magnitude could force some Iowans to drop health insurance entirely. . .. Recent reports have stated that Wellmark Blue Cross and Blue Shield plans to raise premiums by an average of 18 percent for approximately 80,000 of its 1.8 million customers. This is almost twice as much as last year's 9.3 percent increase. Moreover, some 44,000 Wellmark beneficiaries will see rate increases as high as 22 percent. I'm particularly concerned about the level of these increases since the Centers for Medicare and Medicaid Services' Office of the Actuary recently reported that health care spending increased by a much lower rate of 5.7 percent in 2009. ... Iowans deserve a clear explanation for why premiums are increasing at a much faster rate than national health care spending."

A certain strand of the conventional wisdom on the financial crisis is expressed by Bill Gates in a new post on the Microsoft founder's Web site. "The key players – particularly Bernanke but also Paulson – did a great job handling this crisis," Mr. Gates says, echoing his friend Warren Buffett's claim that Federal Reserve Chairman Bernanke, Treasury Secretary Paulson, and Treasury Secretary Geithner are "heroes." A counter-indicator comes in the latest data from the Federal Deposit Insurance Corporation, which reports that "At the end of December, there were 702 insured institutions on the 'Problem List,' up from 552 on September 30." What's more, "Forty-five institutions failed during the fourth quarter, bringing the total number of failures for the year to 140, the highest annual total since 1992." And, "Insured banks and thrifts charged off $53.0 billion in uncollectible loans during the quarter, up from $38.6 billion a year earlier." Banks are lending less: "This is the sixth consecutive quarter in which the industry's loan balances declined. Loans to commercial and industrial (C&I) borrowers declined by $54.5 billion (4.3 percent) and real estate construction and development loans declined by $41.5 billion (8.4 percent)."

The righthand column of the FutureOfCapitalism.com home page now features a new service called The Big Twitter Tent, which aggregates some of the best opinions and commentary on the World Wide Web, including contributions from the Wall Street Journal editorial page, Reason magazine, the Cato Institute, the Heritage Foundation, the American Enterprise Institute, the Manhattan Institute, the Hoover Institution, the Tax Foundation, Fox Business's John Stossel, Harvard economics professor Greg Mankiw, author and economist Thomas Sowell, economists Mark Perry, William Easterly, Larry Kudlow, and Russ Roberts, Senator Scott Brown of Massachusetts, the Mises Institute, the Ayn Rand Center, the Institute for Justice, former Bush administration official Keith Hennessey, journalist and author Timothy Carney, radio personalities Glenn Beck and Dennis Prager, and the University of Tennessee law professor Glenn Reynolds, who is known as Instapundit. We don't endorse or agree with every opinion aired, but think that the sum total is a great example of the wisdom of crowds, and a good way to add more high quality, frequently updated content to FutureOfCapitalism.com. The feature expands into a full page of the site here. Please use the comments thread to let us know what you think of the new feature. If you like it, please tell your friends about it. Is there anyone whose Twitter feed has been left out of the Big Tent who you think should be included? Is there any one who has been included who you think doesn't belong there? If you operate a Twitter feed or Web site and would like your own content considered for inclusion in The Big Twitter Tent, please contact us by emailing [email protected]. And if you have your own Web site and would like to get a Big Twitter Tent box operating for free on your site, contact us by emailing [email protected] -- we'd be happy to help.