Why is Wall Street like a church? Buffett supplies the answer

Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc., said Wall Street is like a church that benefits society, then falters by operating a gambling venture on the side. Wall Street “does a lot of good things and then it's got this casino,” Buffett said today at Fortune magazine's Most Powerful Women conference in Washington. “It's like a church that runs a raffle on the weekend.” Buffett relies on investment banks to help finance acquisitions such as his $27 billion purchase of railroad Burlington Northern Santa Fe and to offer derivative contracts that allow him to speculate on the stock market. Omaha, Nebraska-based Berkshire invested $5 billion in Goldman Sachs Group Inc. in 2008 at the depths of the credit crisis. Buffett has also faulted Wall Street for excessive bets on U.S. housing. “People have a propensity to gamble, and it gets made easier and easier for them,” Buffett said. “One of the problems we still have is we have unbalanced incentives for managers of huge financial institutions.” His remarks echo comments made last year that bankers must face a “downside” on pay to limit risk-taking. “I don't look at Wall Street as ‘evil,'” he said last year. “I look at Wall Street as given to huge excess sometimes. I don't want to get rid of it. We need something to allocate capital and distribute securities.” Buffett built an equity portfolio of about $55 billion by buying and holding stocks of companies that he believes have durable competitive advantages. Berkshire is the largest investor in Coca-Cola Co. and Wells Fargo & Co. “It's quite clear that stocks are cheaper than bonds,” Buffett said today. “I can't imagine anyone having bonds in their portfolio when they can own equities.”