A Very Expensive Berkshire/Goldman Deal

If you missed last night’s discussion on the "vote of confidence" deal from Warren Buffett, you are missing the big picture. Go read:  Berkshire to GS: "I Got $5 Billion, but Its Gonna Cost Ya."

The headline writers of both the NYT and the WSJ missed the numbers involved:

NYT: Buffett Deal at Goldman Is Seen as a Sign of Confidence

WSJ:  Move by Famed Investor’s Is Seen as a Vote of Confidence in Crisis-Stricken Banking System

Doug Kass goes last night’s analysis one better, and notes that using a Black Scholes produces a valuation of $2.8 billion dollars for the warrants. That makes the effective yield over 20% on the preferred purchase.

As we noted last night, this is terrific for Buffett, who smelled blood in the water. Its a tough deal for Goldman, who were a) obviously in a bind for capital; and 2) smart enough to learn from Lehman Brothers mistakes.

Category: Bailouts, M&A

CEO Clawback Provisions in the Bailout?

With Congress recognizing the public’s dismay over this massive taxpayer giveaway, we are starting to see some serious questions about the folks who drove the financial ship of state aground. Hence, its time to take a closer look at pay and severance packages for CEOs at investment houses, banks and mortgage lenders, who perversely stand…Read More

Category: Bailouts, Corporate Management, Wages & Income

Berkshire to GS: “I Got $5 Billion, but Its Gonna Cost Ya”


Goldman Sachs Group Inc. will raise at least $7.5 billion from Warren Buffett’s Berkshire Hathaway Inc. and public investors in a bid to quell concerns that pushed up the Wall Street firm’s borrowing costs and hurt its stock.

Berkshire is buying $5 billion of perpetual preferred shares, New York-based Goldman said today in a statement. Goldman, which this week transformed itself from the biggest U.S. securities firm to the fourth-largest bank by assets, also plans to raise at least $2.5 billion by selling common stock in a public offering.

Goldman Chief Executive Officer Lloyd Blankfein is turning to Buffett, the billionaire investor and second-wealthiest American, to boost market confidence even though Goldman hasn’t reported a quarterly loss since it went public in 1999. The bankruptcy of Lehman Brothers Holdings Inc. and emergency sale of Merrill Lynch & Co. to Bank of America Corp. on Sept. 15 have fueled fears about firms that rely on bond markets for funding.

Category: Corporate Management, Credit, Finance, M&A, Psychology

Communists of the World Unite!

This was a full page advert in today’s New York Times, paid for by Bill Perkins > UPDATE: September 24, 2008 9:44am The WSJ picked up the advert in this morning’s paper: The president has run into a wall of skepticism over his plan. Troubled voters are calling their congressmen. Academic economists are churning out…Read More

Category: Bailouts

Securitized Hybrid Investment Trust Bailout Plan

Category: Bailouts

The Innovator, the Imitator, the Idiot

Category: Credit, Markets, Psychology


Category: Bailouts

House Oversight Committee Seeks AIG, LEH Info

Category: Bailouts, Short Selling, Taxes and Policy

14 Questions for Paulson & Bernanke

Is the United States in a recession? Is it likely to get much worse before it gets better?

Category: Bailouts, Credit, Derivatives, Politics, Taxes and Policy

Have the Media Been Too Easy on the Financials?

Is the media coddling Banks and Brokers in their coverage? Gawker observes:

In July, when Richard Fuld was blaming rumormongers and short-sellers for troubles as Lehman Brothers, the Times ran a column by finance writer Andrew Ross Sorkin echoing his complaints and calling one of the rumors, that Barclays would acquire Lehman, "absurd." Today, with Barclays buying Lehman’s U.S. operations, the Times is still siding with investment banks over investors, depositors and others who benefit from the free flow of information. Here’s some data the paper won’t be providing about the mess on Wall Street, according to an article it published today:

"…said Lawrence Ingrassia, business editor of The Times. “We aren’t going to say, ‘Here are three or five institutions that might fail next week.’ It’s one thing to say an industrial company is having trouble paying its debts, and another thing to say it about a financial institution.”

The Wall Street Journal is also censoring itself on behalf of large banks. Its spokesman said the newspaper would "stay away from" the words "crash," "panic," "pandemonium" and "apocalypse."

Both interesting and amazing . . .


Hat tip Scott

Press Coddles Banks With Pulled Punches
Ryan Tate
Gawker, 8:41 AM on Mon Sep 22 2008

Gasparino vs Einhorn, Kohn & Ritholtz 
TBP, June 05, 2008 | 01:52 PM 

Amid Market Turmoil, Some Journalists Try to Tone Down Emotion
NYT, September 21, 2008 

Read More

Category: Financial Press