DealZone

What would Buffett do?

November 4, 2008

As the U.S. Treasury thinks about expanding its capital injection program to include companies such as GE Capital and CIT, it may want to ask itself, what would Warren Buffett do?

Buffett’s Berkshire Hathaway is buying $3 billion of preferred GE shares that carry a 10 percent dividend, and also has the option to buy another $3 billion of GE common stock at $22.25 per share, which is 28 percent higher than the 52-week low of $17.41.

In Goldman, the billionaire investor agreed to buy $5 billion of preferred stock that carries a 10 percent dividend and receive warrants to buy $5 billion of common stock at $115 per share, now 55 percent higher than the 52-week low of $74.

Compare that to what the Treasury has done so far.

In JPMorgan Chase, for instance, the Treasury bought preferred shares worth $25 billion, carrying a dividend of just 5 percent for the first five years and 9 percent after that. It also got warrants for 88.4 million shares at an exercise price of $42.42, which is 45 percent higher than the year’s low of $29.25.

One banker said the election could determine the terms on which the Treasury decides to make more capital injections, with taxpayers likely to get a better deal under Barack Obama.

“Any deal would look more like a Buffett deal than a Paulson deal,” said Dan Alpert, a banker at Westwood Capital in New York.

(Reporting by Paritosh Bansal and Dan Wilchins. Photo credit: Reuters)

Comments
8 comments so far | RSS Comments RSS

Who gives a damn what Buffett thinks. The guy has become the richest man in the world by charging ridiculous rates in insurance lately. Meantime, he supports Obama to bring the value down of many companies through taxation so that his company can pick them up for dirt cheap prices.

Posted by John | Report as abusive
 

Buffet a member of the Cabal of financial leaders?

read Louis Brandeis book, Others People’s Money–and How the Bankers Use It.

see the Pujo Committee.

Buffet only cares about himself and needs to console his infinite insecurity with capital.

Posted by Jack Michigan USA | Report as abusive
 

We’ll see what he does if his business partner(penny pritzker) get the U.S. treasury job.

Posted by jason | Report as abusive
 

I’m curious if Buffett’s going to be appointed Treasury Secretary :)

 

If Buffett was appointed Treasury Secretary, at least there’d be one person on board who had a clue about how a successful economy works. But, the way it’s going, Obama will probably choose one of his machinists from Chicago.

Posted by barbara | Report as abusive
 

hellooo

 

What is the connection between getting paid for a trade and saving for retirement. ckh1213 – You said those that invested for their retirement and lost money got what they deserved. They need to learn a trade to get paid. They are getting paid for a Trade – thus investing money to retire. How were they to know of the collapse coming prior to it

Posted by Mara | Report as abusive
 

buffett, needs to buy the majority stock in g.m. and ford ,then he can turn these two blind companys around to produce more energy efficient cars gov. should not they need to restructure our auto industry now but buffett is probably to scared to take a risk like that

Posted by joseph | Report as abusive
 

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