Warren Buffett Defends Goldman Sachs at Annual Meeting

At the May 1 Berkshire Hathaway shareholders meeting in Omaha, Nebraska, not unsurprisingly, the first question of Berkshire’s CEO, Warren Buffett, focused on the Securities and Exchange Commission fraud lawsuit against investment banking giant Goldman Sachs of which Berkshire owns $5 billion in preferred stock.

Among Buffett’s comments:

“Our experience with Goldman goes back 44 years. During those years, we’ve bought more businesses through them than through any other Wall Street investment bank. They have helped build Berkshire Hathaway.”

Buffett noted that Goldman was an underwriter of the first bond he and his business partner Charlie Munger floated. In 1967, Goldman took $351,000 of the $5.5 million bond for Diversified Retailing Co. which Buffett quipped was only one store but he and Munger were “optimistic.”

Of the impact of the lawsuit on Goldman Sachs, Buffett said:

“No question the allegation alone causes the company to lose reputation and obviously the press of the last few weeks. It hurts. (But) I don’t believe the allegation of something falls within my category of losing reputation.”

(Emphasis added.)

And, of the SEC lawsuit’s effect on Berkshire Hathaway:

“Ironically, very ironically, it’s helped our investment in Goldman. (The) $5 billion preferred stock … pays us $500 million per year. Every day that goes by that Goldman does not call our preferred is money in the bank. Our preferred is paying us $15 a second. Tick. Tick. Tick. I don’t want those ticks to go away. Nights. Weekends. Frankly, Goldman would love to get rid of that preferred. Recent developments have probably delayed the calling of our preferred by some time. So tick, tick, tick will go on. We love the investment.”


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