Buffett's Goldman Deal Is No Charity

Still, Mr. Buffett is not taking big risks based on the structure of the investment.

Berkshire Hathaway will receive perpetual preferred shares in Goldman, which will pay a 10 annual percent dividend, or $500 million a year. Those dividends take precedence over other payments to common shareholders. Goldman has the right to buy back the shares at any time for a premium of 10 percent.

In addition, Berkshire Hathaway will receive warrants to buy $5 billion in common stock at a strike price of $115 a share, which can be used at any time in a five-year period. Those warrants are already in the money: Goldman shares closed Tuesday at $125.05, up $4.27, and rose to $134.75 in after-hours trading after Mr. Buffett's investment was announced.

Comments

[freebeer]

Maybe Buffet is in now as the "Hail Mary pass" by the fascists who are sponsoring this crime against America.

Maybe the big Big BIG story about how this "plan" to steal $700 billion has been drawn up for weeks or possibly months. That's right, a Cheney aid let it slip when he stupidly tried to defend the suspicious timing of the bailout.
http://emptywheel.firedoglake.com/2008/09/23/bush-mouthpiece-admits-theyve-been-sitting-on-this-plan/

So it looks like this bipartisan love fest to approve the bailout should be in serious trouble.
So maybe the cute cuddly newly philanthropic Buffet is being trotted out to close the deal quickly. Because if word gets out that this swindle has been drawn up for a month, the time pressure to close this deal evaporates.
But don't look for this inconvenient truth on mass media because they are working with Republicans and Democrats to screw us. Funny how I see four or five pro Buffet headlines up now at huffpost, but not one mention of the fact that this crime has been in the works for a long time.

[CaptainAsshole]

newly philanthropic? you need to do your research. While the amounts recently are larger, he has been a philanthropist for a long long time.

Buffett is a straight shooter. I would absolutely kill to have 1-5 shares of Berkshire Hathaway.

A smart man will make money when the market is up and when it's down.

[ezwizzard]

Follow Buffet's Lead!
For $700 Billion, US wants:
- 10 annual percent dividend on preferred shares,
- Dividends take precedence over other payments to common shareholders.
- Troubled institution has the right to buy back the shares at any time for a premium of 10 percent.
A corporate government corporation similar to TVA or BPA would be set up to manage and safegard the investment.
US should not be the mullet for savy tycoons like Buffet to front-run any bailout!

[joebaggadonuts]

Right you are ezwizard. Besides, since he was out of character telling his subsidiaries to quit insuring deposits above the FDIC maximum just weeks ago, his companies apparently have lots to lose if the deal does not get done. Remember he is in insurance like AIG and he wants to make the going easy for Berkshire-Hathaway before he retires. He would hate to see his legacy destroyed so he will do anything to make this work for his shareholders and himself.

What I really hate is the references he and the Treasury are making about how the bill should be moved clean and quick; as if the American public is a lamb being prepared for slaughter.

Disclaimer: I don't own any shares of Berkshire-Hathaway.

[JScott]

Oh please you can be sure he's looked at the fundamentals of this investment and he probably looked at the potential gain (if he hasn't gained from it already) and since almost all the economy needs financial services, and the rest of the economy other than finance is still doing pretty good (other goods and services are STILL being produced and sold) he knows it's a good investment.
Just wish I had the money to at least get 1 share of Bershire Hathaway.

[ggirl00]

Buffett is a business man ... clearly there's some money to be made here.

[ErnestineBass]

Yep. Buffett wants his share of OUR $700 Billion. The Oracle is just another pirate.

[SoCalAmerican]

You're hating the player, when you should be hating the game. His methods have NOTHING to do with the speculative forces of the market that brought this mess. He "values" the fundamentals of companies.­..everyone knows this about him. Just because someone has the opportunity buy great value and a really low price doesn't make him a thief does it?

Plus do you really think he was the only rich entity (in the world) eyeing these companies way below value? From a patriotic sense, I would rather have an American invest his stakes back in our markets than foreign entities from Europe and Asia...Buf­fet was smart enough to beat everyone out.

It doesn't make you a thief if you can buy your dream home (in the millions I'm sure), on the foreclosure market under $500K does it? I doubt anyone would be ringing the door bell calling you a thief...

[NoSillyName]

Oddly worded headline on the main page.

[Egalitare]

Why is Buffett in now?

Buy low, sell high (or hold and rake in the dividend stream).

[terramartom]

Good, let private money rescue private failures!
No Bail out for Wall Street Greed.
Instead, lengthy prison sentences and confiscation of personal wealth for all politicians who voted against regulation and the CEOs that stole from their own stockholders.
NO MORE GIVEAWAYS you CROOKS!

[MajMike]

I've read everything Buffet has written, and most stuff written about him. If Buffet is investing it's because he sees profits down the road. He has always taken more risk than other investors, that's mainly responsible for his higher returns, mostly by keeping the diversity of investments lower than normal (allows for higher/lower returns).

Caveat: He's betting his own money, Paulson is betting ours.

[Speakupper]

Paulson is gambling our $. Buffet has GUARANTEED himself at minimum 10% return. Hardly a bet! Why Goldman Sachs? Paulson was chairman and ceo there.

[FaceYourFears]

The rich keep getting richer....

[ggirl00]

... and richer and richer ...

[who38]

With terms like this, no wonder Buffett is supportive. His profit is guaranteed; other stockholder's profit is not. Ten percent for the next five years will be big money compared to what the average stockholder will get. Time to sell Goldman.

[styleturn]

Who gains and who loses.

Clearly the taxpayers, borrowing from the Chinese, are the big losers. Paulson's argument seems to be that in saving the economy the taxpayer should be glad to shoulder the burden.

Who gains? Goldman and Morgan, on the same day last week, were converted from investment banks to bank holding companies. Various news stories soon pointed out that both were looking for cheap regional banks. The Paulson proposal to buy high and sell cheap, via this $700b slush fund, means the major beneficiaries would be those banks with direct access to the Fed and are able to buy the most "clean" assets. To say that Goldman and Morgan are well placed to be the major beneficiaries is a serious understatement.

Buffet is a smart guy and is planning to cleanup big time on Bush's overhaul of the economic system. What should they call it? Not socialism, not capitalism. Certainly not communism since the government would simply be the silent protector of corporate profits. Perhaps a new word like corporatism.

corporatism
noun
the control of a state or organization by large interest groups.

Yeah, thats the ticket.

[Progress08]

plutocracy

[MDinOK]

If you oppose this bill, take time out to contact your senator and representative now.

http://www.congress.org/congressorg/home/

[ggirl00]

Thanks! We should all take a minute to contact our senator and representatives.

[Erdgeist]

So why don't we do this with the 700 billion? Why should the taxpayers have to buy trash for cash? Let us be Buffett about this! Nobody can argue that if we used the 700 billion like Buffett the new equity would improve banks' capital ratios. The risk is not more than just giving Paulson the money to pay off Bush and Cheney's pals (which is probably the case).

Of course there is another way to look at this: Why do we need banks at all? They are, essentially, just playing the middle man. So let's dump 'em. Instead, let's deposit and borrow directly from the Fed itself. This way we might also eliminate the worthless high paid CEOs who screw things up. To be sure, the Fed is far better at managing our money. And Big Ben Ben Bernanke makes only about $200K. This is small potatoes as compared with what crooked CEOs make.

[Progress08]

I totally agree. We deserve 100 billion in profit on this investment. Put the profit back into the Social Security system. The caveat has to be that the CEO gets no golden parachute and no bonus. The government by terms of the bailout nullify those jackasses contracts and pay them nothing. We have to make the bailout so extremely painful for the morons who caused this mess that they're begging for more regulation.

[who38]

Like your idea. Thanks, Warren, for leading the way. I like the idea that we will own the things that we pay for. We can then make sure that the Boards of Directors are not just poodles for the CEOs.

[rockyersocksoff]

No bailout.

Let the market work.

If there is meat left on the carcasses of Wall Street, investors will determine what it's worth. Guys like Buffett.

NOT Hank Paulsen NOR Chris Dodd.

[RStone]

Keep Washington away from Wall street and Main Street! Buffet sees a great deal when he sees one. Tooo bad congress and paulson can't invest the American peoples money the way Buffet does!

Goal today...1,­000,000 bops on McSame!

http://www.boppoll.com

I just added 450 bops and it feels great. I am starting my day the stress free way!

[Progress08]

I got a thousand in until the constant mouse clicking drove my neighbor here in cubicle town nuts.

[jsalomon11]

Shocker Buffett is investing. Everyone knows he's only trying to make money but the media covers it as if he were this great man putting his money as risk simply for the sake of saving our economy. If the bailout doesn't pass maybe his stock will drop below six figures, I'm so hurt.

[Progress08]

It's not the economy, it's the jobs. Buffett's investments are so well executed that every company he takes an interest in actually grows and that means more jobs. More jobs means more tax base means more money for schools and more of the "common wealth" to pay for defense and safe drugs and safe food. Repuglican Fu(ktards never get the big picture, you just run around screaming "DEREGULATION" and "TAXES ARE EVIL". You only think taxes are good as long as the poor are paying disproportionally high amounts and you're benefitting from them. We can drive on our interstates and highways because of taxes. All the commerce that happens in the trailers of semi's has taxes to thank.