May 2, 2010

Buffett Offers Support of Goldman at Meeting

Filed under: Uncategorized — ktetaichinh @ 2:28 am
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Mr. Buffett also strongly defended the firm’s chief executive, Lloyd C. Blankfein, saying he did not think Mr. Blankfein needed to be replaced.

His support for Goldman came in a question-and-answer session at the annual meeting in Omaha of Berkshire Hathaway, the giant insurance and investment firm Mr. Buffett runs. Berkshire owns $5 billion of preferred stock in Goldman.

Still, what drew the most attention was Mr. Buffett’s full-throated support for Goldman. He drew upon some of the same points that Goldman has used in its own defense, including the sophistication of the investors the S.E.C. says were defrauded by Goldman’s lack of adequate disclosure in the deal. He said those investors should have conducted better due diligence. Of one investor, he said, “It’s hard for me to get terribly sympathetic when a bank makes a dumb credit bet.”

He also stood behind Mr. Blankfein. When asked whom he would select if Goldman needed to find a new leader, Mr. Buffett replied, “If Lloyd had a twin brother, I would vote for him.”

Mr. Buffett has a significant investment in Goldman. In 2008, during the depths of the financial crisis, Berkshire invested $5 billion in preferred shares. Those shares carry a 10 percent interest rate, meaning that Berkshire is earning about $500 million a year from its holdings. (Or as Mr. Buffett put it, $15 a second.)

Though Mr. Buffett said the S.E.C. lawsuit had not yet negatively influenced his opinion of Goldman, he said he would revise his thinking if new evidence came to light.

Mr. Buffett added that Goldman is a longtime adviser that “helped build Berkshire Hathaway” by selling them businesses for more than 50 years.

Mr. Buffett’s longtime lieutenant, Charles Munger, tempered his boss’s kind words. Mr. Munger, Berkshire’s vice chairman, said that there is a difference between behaving legally and behaving ethically — and that a business should not simply follow the former.

Mr. Buffett also weighed in on the financial regulation overhaul bill that is pending in the Senate, which include provisions that may force investors in derivatives contracts to add more collateral to their holdings. (Berkshire has lobbied against such provisions.) Mr. Buffett said that Berkshire was unlikely to be forced to “put up a dime” in additional money on its existing contracts, though he added that the firm would do so if required.


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