Buffett Backs Goldman

"There's really no reason to think about somebody else running Goldman"

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    NEWSLETTERS

    TK
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    Buffett backs Goldman.

    Berkshire Hathaway CEO Warren Buffett declared his support for Goldman Sachs' CEO Lloyd Blankfein Saturday, and said he has no plans to sell his company's stake in the bank.

    Buffett and Berkshire vice chairman Charlie Munger praised Goldman before a crowd of about 40,000 at Berkshire's annual shareholder meeting. Both executives said they're happy with Blankfein's leadership and said they don't view the Securities and Exchange Commission's civil fraud charges against Goldman as a strike against him.

    "There's really no reason to think about somebody else running Goldman,'' Buffett said when asked whether someone besides Blankfein should be leading the investment bank. The charges filed April 16 have raised questions about Blankfein's tenure.

    Buffett has been one of Goldman's biggest supporters before and since the SEC filed its civil lawsuit against the bank. The government charged that the investment bank misled investors about a deal involving complex mortgage-related investments that later plunged in value.

    During questioning by shareholders, Munger noted that the SEC vote to file the charges was 3 to 2. He said that if he had been a member of the SEC, he would have voted against the suit.

    Buffett and Munger both expressed confidence in Blankfein.

    "There are plenty of CEOs I'd like to see gone in America, and Lloyd Blankfein is not one of them,'' Munger said.

    On Friday, Goldman stock plunged 9 percent on reports that the Justice Department had opened a criminal investigation of Goldman.

    Buffett said Berkshire's $5 billion of preferred stock in Goldman is a good investment because it generates 10 percent interest a year. He said the investment includes warrants that can convert the preferred shares into regular stock at $115 a share, a discount from Goldman's current price of $145.20.

    Buffett and Munger also discussed the financial overhaul legislation now before Congress. Munger said the regulatory system should be changed to be much less permissive for investment banks.

    The House has passed a version of the bill, which among other things would limit the kinds of lucrative trading that banks including Goldman Sachs do. The Senate has yet to begin debate on its version.

    Berkshire has objected to one provision of the financial overhaul that could require companies to post collateral on existing derivative contracts. Derivatives are complex investments that have been blamed in part for the 2008 financial crisis and the recession. Banks lost billions of dollars on derivatives, and that and the recession led the government to bail out hundreds of financial companies.

    But Buffett said he doesn't believe the bill, as it's written now, would require Berkshire to post any additional collateral on its 250 derivatives because the company is unlikely to be considered a threat to the system.

    "If the bill passes tomorrow ... we would not have to put up a dime,'' Buffett said.