24 September 2008

Buffett: The Power of One

Goldman's stock rose 6.5% in a matter of hours after Warren Buffet said "I'm in" to the tune of $5 billion. Wise investment? Corporate philanthropy? Both? Either way, there might be a lesson for the federal government.

From the WSJ:

While Mr. Buffett's investment is unquestionably a vote of confidence in Goldman, it is structured to protect him from losses. The dividends from the preferred shares will remain steady even if Goldman's stock falls. And if it does, Mr. Buffett won't spend the $5 billion to exercise the warrants to buy common. Including Goldman's after-hours stock jump, Berkshire has a nearly $700 million paper profit on the deal already.
Is it too much to ask Hank Paulson to guarantee similar protections for taxpayer investments as Buffet worked out for his Berkshire Hathaway company?

Politicos, alas, are already jumping on the opportunity to, well, politicize. The Journal goes on to report:
Democratic Sen. Charles Schumer of New York, a member of the Banking Committee and his party's leadership, called the Berkshire investment "a vote of confidence not only in Goldman but in Washington's commitment to come up with a plan."
[T]he Berkshire news may rev up Republicans who already are arguing that such private investment is superior to a costly taxpayer-funded rescue plan. "People are holding back, and it sounds like Mr. Buffett is trying to lead by example for the financial community," said Rep. Thaddeus McCotter of Michigan, a member of the Financial Services Committee and Republican leadership.
Indeed. I was just waiting for somebody else to go first, and now I'm ready to ante up my first $100 million to help right the country. Anybody with me?

We'll learn more, and hear more opportunistic sound bites, as the day progresses.