Warren Buffett Takes On $5B Stake in Goldman Sachs
Comparing the country’s financial crisis to an “economic pearl harbor,” billionaire investor Warren Buffet is backing U.S. Treasury Secretary Henry Paulson’s $700 billion proposal to bail out Wall Street and rid financial institutions of toxic mortgage-related debt.
Buffet also is buying a $5 billion stake in Goldman Sachs, a company in which Paulson - who reportedly is worth some $700 million - served as chairman and chief executive officer until taking his federal post in 2006.
On Tuesday, Paulson began another day of intense grilling by Senate Banking Committee members, as he fervently tried to sell them on his bail-out plan for the nation’s wrecked financial system. His proposal potentially could cost every man, woman and child in the United States $2,300, according to Reuters.
As for Buffett’s announcement to put $5 billion into Goldman Sachs, the news lifted the company’s shares nearly 7%. Over the past year, shares have fallen more than 40% in value.
Buffett’s cash infusion into Goldman entails his investment company, Berkshire Hathaway, buying $5 billion worth of perpetual preferred stock via a private offering. Buffett will then receive a 10% dividend, plus warrants to purchase $5 billion of common stock at a strike price of $115 a share.
Meanwhile, angry protestors are continuing to march in front of the New York Federal Reserve this week, with banners proclaiming: “Bail out Main Street, not just Wall Street.”
Our affiliation of securities lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses.
