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Ear to the Ground

Buffett Pumps Up Bank of America

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Posted on Aug 25, 2011
Flickr / Wonderlane (CC-BY)

Warren Buffett’s company Berkshire Hathaway negotiated a $5 billion investment with Bank of America on Thursday, a vote of confidence in the recently ailing institution. [Earlier Thursday, Truthdig erroneously reported the figure as $5 million.]

Bank of America shares had lost about a third of their value in August alone before Buffett stepped in, but the shares rose 24 percent to $8.65 in early trading Thursday on word of the deal before falling back at midday.

Always a shrewd businessman, Buffett negotiated exceedingly favorable terms from Bank of America, but it will have been worth it for the bank if the instant infusion of capital quells shareholder fears and attracts new investments, as Buffett’s investment in Goldman Sachs did at the height of the financial crisis. —BF

Reuters:

It is virtually a mirror of the deal Berkshire did with Goldman in the depths of the crisis in fall 2008, except in this case the dividend is less. The Goldman deal paid Berkshire $15 a second in dividends until Goldman bought Buffett out earlier this year.

Market watchers said the deal proved again that Buffett had become something of a lender of last resort to the financial system, as he did with Goldman and also GE.

“This proves to the market that if the bank needs additional capital, which we don’t believe they do, but if they needed to calm the market by raising capital, they could do it within 30 minutes with a quick call to Uncle Warren,” said Sean Egan, managing principal of Egan-Jones Ratings.

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By ardee, August 28, 2011 at 8:05 am Link to this comment

litlpeep, August 26 at 3:58 am Link to this comment

Why would we be surprised that Rooters made a cheer for a known, fabulously successful investor as if that were a cheer for the failing BofA?

I am unaware of who this Rooters person may be, as I am equally unaware if your post had an actual point. All I can do is repeat the following:

It would really be refreshing if folks researched prior to posting opinions. We cannot hope to arrive at correct analysis and proper courses of action if we base our politics on falsehoods.

Report this

By litlpeep, August 26, 2011 at 3:58 am Link to this comment

Why would we be surprised that Rooters made a cheer for
a known, fabulously successful investor as if that were a cheer for the failing BofA?

Will Rooters also tell us when & how much Buffett shorts BofA?

Or when Goldman or Jamie Dimon or Soros does?

Of course not?

Stock Markets are for suckers.

Report this

By ardee, August 26, 2011 at 2:31 am Link to this comment

caped amigo, August 25 at 3:25 pm Link to this comment

Buffett has to jump in and try to save these evil people. He has stock in B of A at
much higher prices.

Errr wrong! Buffet dumped B of A stock some time ago, leading to a perilous decline in their position. This deal is not to save Buffet but to help bolster the economy. Plus about 6% in profits .

It would really be refreshing if folks researched prior to posting opinions. We cannot hope to arrive at correct analysis and proper courses of action if we base our politics on falsehoods.

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Queenie's avatar

By Queenie, August 25, 2011 at 8:10 pm Link to this comment

caped amigo:
May I say amen to that?

I’d really like to see these banksters and Wall St. hustlers piled up like cordwood 3 stories high to be used as fuel on Guy Fawkes night.

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caped amigo's avatar

By caped amigo, August 25, 2011 at 3:25 pm Link to this comment

Buffett has to jump in and try to save these evil people. He has stock in B of A at
much higher prices. I don’t want to believe he supports them morally and is just
trying to save the fat of his little investors.
Having said that, I want to make it clear that I hope they go under big time.

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cpb's avatar

By cpb, August 25, 2011 at 2:05 pm Link to this comment

Just the idea that we live within an economic system that
can create so much wealth in the hands of a single
individual that said moneybag could be capable of bailing
out a bank.

Oh wait, I’m sorry, silly me.  He’s just THAT MUCH SMARTER
AND HARDER WORKING then the rest of us…

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