Warren Buffett’s Berkshire Hathaway pumped billions of dollars into GE and Goldman Sachs to keep them afloat. At the same time, he advocated the passage of TARP in October 2008 to bail out banks and firms to the tune of hundreds of billions of dollars – a large portion of which is still outstanding today, despite press releases touting the payback of funds.
Buffett appears to be at it again, investing billions of dollars into troubled banks to prop them up amid deflating book values and spiraling debt. Again, it comes as we head into a heated election season – Buffett had a White House meeting on Tuesday, as more people begin focusing on 2012.
The latest beneficiary is the oft-maligned Bank of America, home of accusations of fraud, bad loans, overpaid mergers, corporate greed gone bad, and of course the aiding and abetting of illegal immigration. Bank of America will receive a $5 billion infusion from Berkshire Hathaway in exchange for preferred stock.
Reports have been flying fast and furious regarding liquidity problems for the larger banks, with Bank of America at the top of the list. Despite reports of near-insolvency, a press release indicated the bank was in dire need to raise capital, while other stories were floated regarding immediate government bailout and/or acquisition by JP Morgan Chase.
BofA denied these reports again yesterday – right before the announcement came out that it had gone and done exactly that with the Buffett investment. Buffett is already coming out if the deal looking great, as the stock is already 15% above the purchase price of his warrants. Bank of America, on the other hand, has gotten some short-term cash infusion in exchange for having everyone in the free world know just how bad its problems are.
Meanwhile, the Obama administration gets to avoid – for now – another argument of what companies are “too big to fail” and more charges of just how poor its response is to a failing giant (which supported him in 2008) in an even sicker economy.