The gift that doesn't keep on giving...

Back in 2008, when our economy was in the midst of its nose dive, Warren Buffet stepped in and gave Goldman Sachs a shot in the arm with a $5 billion "investment" in the "bank holding company."

At the time, Buffet was quoted in the Guardian as saying::

"Five years from now, ten years from now, we will look back at this period and we will say you could have made some extraordinary buys.

"The American economy over a period of time will do very well, and people that own a piece of it will do very well."

At that time, he also praised Goldman Sachs for being "an exceptional institution" with an "unrivaled global franchise, a proven and deep management team and the intellectual and financial capital to continue its track record of outperformance."

Back then, Buffet's investment boosted confidence in the markets and calmed the markets.

Today, Buffet has proved to be right about the "extraordinary buys" to be had back in 2008. He was certainly right about characterizing Goldman Sachs as an "exceptional institution."

But he's proving wrong about how people who invested in those "extraordinary buys" would "do very well."

Buffet himself did great by his investment in Goldman Sachs. He drove a hard bargain with the bank, asking for 10% interest on the loan. When the government stepped in a week later with its loan to Goldman Sachs, they were much kinder, asking only a 5% return on their investment in the company.

As Dean Baker, co-director of the Center for Economic and Policy Research in DC points out, it was a very generous gift our government gave to the bank:

"The Treasury boasted of getting a $1.1 billion profit on its loans to Goldman, but as Mr. Buffet showed, this was far below the market rate of interest on loans to Goldman at the time. The difference between the return received by Buffett and the return received by the Treasury was in effect a gift from taxpayers to the top executives at Goldman and their shareholders."

And as Baker notes, it's a gift our country can ill-afford today:

"At a time when all the tough guys in Washington are making plans to cut Social Security and Medicare benefits for high-living seniors and to cut Head Start for low-income kids, it was generous of Warren Buffett to point out that we taxpayers gave over $1 billion to Goldman Sachs through TARP. Buffett probably didn't intend to point out this fact to the country, but it is an unavoidable implication of his $2 billion profit on his loans to Goldman."

As legislators throughout the country begin sharpening their knives to slice billions from state and federal budgets mauled by the Great Recession, voters will begin to take a closer look at the deals we made to save our financial community. With drastic cuts in education and other social services on the horizon, it's looking more and more like the brilliant save of our economy is actually a bad deal for taxpayers.