Mr. Buffett's stake in Bank of America could pay off for years.
When most panicked during the financial crisis, Warren Buffett invested, reaping more than $10 billion, The Wall Street Journal reported Monday.
"In terms of simple profitability, an average investor could have done just as well investing in the stock market if they bought during the panic period," Buffett told the Journal on Saturday. "You make your best buys when people are overwhelmingly fearful.
Of course the ordinary investor didn't have the comfort of knowing that the Federal government would use taxpayer money to insure his deals.
As he admitted on CNBC at the time, “If I didn’t think the government was going to act, I wouldn’t be doing anything this week.”
Any ordinary investor.
“Warren Buffett is one of those people that I listen to.” Obama added that the Oracle of Omaha was one of his “economic advisers.”
Any ordinary investor at all who was an economic adviser and backer of the guy at the top.
Several senators and congressmen were shareholders in Berkshire Hathaway and therefore in a position to earn big returns by passing the bailout bill. Sen. Ben Nelson (D-Neb.), for example, held between $1 million and $6 million in Berkshire stock, by far the largest asset in his portfolio. Initially resistant to the bailout bill, Nelson ended up voting in favor of it.
Any ordinary investor who had managed to tangle senators in his web of investments.
Warren Buffett sat down and wrote Treasury Secretary Paulson a four-page letter proposing a larger solution to the financial crisis: a quasi-private fund backed by the U.S. government that would buy bad loans and other rapidly sinking investments. He proposed that for every $10 billion put up by the private sector, the federal government would kick in $40 billion...
What did Buffett do in the six months between writing the letter and watching the adapted policy get approved? He bought more bank stock. According to Berkshire’s quarterly reports, Buffett’s firm bought 12.4 million shares of Wells Fargo during this period and another 1.5 million shares in U.S. Bancorp. When Geithner announced the Public-Private Investment Program, bank stocks rallied and Buffett’s holdings did very well. We don’t know the exact price that Buffett paid for these millions of shares because he is not legally required to list the dates he bought them. But we do know those bank stocks all jumped after Geithner unveiled his program. Wells Fargo, which was trading around $20 per share early in 2009, jumped to $30 a share in the weeks following Geithner’s announcement. U.S. Bancorp did even better: It had hit a low of $8 a share in February 2009 but vaulted to more than $20 a share by May
Any ordinary investor could have done that. Any ordinary investor who could tell a Treasury Secretary what to do.
Buffett's investment company, Berkshire Hathaway Inc. , will collect $300 million annually for letting BofA, Washington state's largest bank by market share, hold its money. Where else do you get that kind of return these days? And it's a pretty safe investment; only at risk if BofA goes belly-up.
When BofA is ready to exit Buffett's equity stake, it'll have to buy the shares back at a 6 percent premium, meaning Buffett gets his $5 billion back, plus $300 million. That's on top of the dividends he received in the meantime.
He would rake in a total of $1.2 billion in dividends and premium payments, a 24 percent return. Then there are the warrants. BofA's two-year high share price was $19.48 in April 2010. If the shares were to reach that point again, Buffett could exercise his warrants, then sell the shares at a profit of $8.7 billion.
Any ordinary investor with a sweetheart deal with a bailed out bank that received special favors from the Federal Government.
The existence of one such secret deal, struck in July between the Federal Reserve Bank of New York and Bank of America, came to light just last week in court filings...
Not only do the filings show the New York Fed helping to thwart another institution’s fraud case against the bank, they also reveal that the New York Fed agreed to give away what may be billions of dollars in potential legal claims.
Any ordinary investor at all. Just a guy off the street who owns the street and is best friends with the guy who runs the street. And how is the Oracle of Obama coming along?
Mr. Buffett's stake in Bank of America could pay off for years. Berkshire invested $5 billion in the bank in 2011, which adds about $300 million in annual pretax income. Bank of America Chief Executive Brian Moynihan recently said he doesn't plan to buy back the preferred shares any time soon. Berkshire also has until 2021 to exercise warrants for 700 million common shares for an additional $5 billion at $7.14 a share. Based on the bank's current stock price of about $14, the warrants create a paper profit of nearly $5 billion.
And when Obama needs money. Well he knows where to go...
The Obama campaign’s monthly FEC report for October has revealed that Obama for America took out a $15 million loan from Bank of America back in September. Due to be paid back on November 14– just eight days after the election– the report says the campaign will be paying a 2.5% interest rate plus the current Libor rate.
The bank contributed $20 million toward the cost of the Democrat National Convention earlier this year. Bank of America stadium, home to the Carolina Panthers, was supposed to host Obama’s acceptance speech.
Any ordinary crony billionaire with close ties to the corrupt ruling establishment. Any one of them at all.