Insider Trading and Berkshire

 This just in: a former Goldman Sachs director has been charged with insider trading in the Galleon case -- for, among other things, leaking the information he learned, as a board member, that Berkshire Hathaway was going to invest $5 billion in Goldman during the financial crisis.

If true, this is one of the most blatant insider trading cases I've heard of in years.  In a sense, it's also not surprising. People have been trying forever to spec out which investments Buffett is making (through legitimate means and guesswork).  Money managers, bankers, and individual investors used to badger me constantly for inside knowledge on this subject, not that I had any. The temptation for someone to cheat was always there.

What's really shocking is that insider trading came about through a company board member. During Goldman's lowest moment, when its survival was on the line, instead of being fully focused on the firm's affairs, a board member (allegedly) used his knowledge of the same to defraud the markets. 

I don't think there is anything particular to Goldman Sachs about this situation. It simply happened to be the firm Buffett was bailing out. The cheating fit the "I'm too clever to have to play by the rules" attitude that permeated the whole financial crisis era. Feeling that one is too special to be subject to the normal rules of life -- including, it seems, the laws of gravity that eventually weigh down Ponzi schemes -- led to so many of the problems we are still cleaning up, from subprime mortgages to Madoff to the hedge fund scandal. 

UPDATE: Here's a very good synopsis from Bloomberg which points out the irony that news of an investment by Buffett -- who is the quintessence of buying for long-term value -- was used as fuel for a short-term trading strategy.