Monday, November 15, 2010

"Why Goldman Sachs Can’t Repay Warren Buffett" (GS; BRK.B)

Blankfein et al are paying Warren $1,369,863 per day on the loan.
From Forbes:
When investors were fleeing equities in September 2008, Warren Buffett decided to invest $5 billion investment in Goldman Sachs. The move gave Goldman an invaluable vote of confidence

Today though, Goldman can’t wait get Buffett out its hair.

Goldman Sachs has been trying to redeem Berkshire Hathaway’s preferred shares since at least October because, according to a report in the Wall Street Journal, it’s been a very costly deal for the firm. Goldman has paid Berkshire about $1 billion in dividend payments so far, according to the report.
It’s likely that the shares could have been redeemed months ago but because Goldman (and other financial institutions who took TARP funds) are at the government’s mercy that hasn’t happened. The Fed needs to approve all such transactions and this one is getting caught up in larger issue of how and when banks should be able to increase dividends. From the Journal:
Goldman officials hoped to win clearance quickly, but the request has been caught up in the wider process of setting a dividend-increase policy for all U.S. banks overseen by the Fed, said people familiar with the matter. The Fed may be reluctant to give Goldman a go-ahead to make adjustments to its capital level before other banks get the same flexibility, the people said.
From the Fed’s point of view, Goldman Sachs needs to first make sure it can maintain higher capital standards before it’s allowed to deal with dividends to shareholders like Berkshire. Plus, when Goldman repurchases the $5 billion in shares from Berkshire it will get hit with a $1.6 billion charge....MORE
No alzheimers in that Omaha office.
(I am starting to wonder about Charlie)