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Monday, May 3, 2010

Warren Buffett Supports Goldman Sachs, Nothing Wrong with What They Did

(CBS) Warren Buffett and Charlie Munger again defended Goldman Sachs Group Inc. on Sunday, saying faulty government regulations are to blame for most of the economic turmoil of the past few years, not investment banks.

Berkshire Hathaway's top two executives met with reporters a day after taking questions before a crowd of about 37,000 at the Omaha company's annual meeting.

Buffett has been one of Goldman's biggest supporters before and since the Securities and Exchange Commission filed its civil lawsuit against the bank last month. Berkshire holds $5 billion in preferred shares of Goldman. Buffett said he has no plans to sell those shares because they remain a very good investment and are paying 10 percent interest a year.

Goldman shares have fallen 22 percent since the SEC filed its suit on April 16, closing Friday at $145.20. Berkshire holds warrants that would let it buy the stock at a discount price of $115 per share.

Warren Buffett's Life and Career

The government has charged that Goldman misled investors about a deal, called Abacus, involving complex mortgage-related investments that later plunged in value. Buffett said he's studied the charges against the investment bank and has "no problem with that Abacus transaction."

The SEC claims Goldman misled investors by failing to disclose important information about the Abacus deal. Goldman allegedly didn't tell investors that one of its clients, hedge fund Paulson & Co., was betting against the securities.

Buffett said ACA, the bond insurer involved in the Abacus deal with Goldman, was responsible for assessing the transaction's risks, and that it shouldn't have mattered that Paulson was betting against ACA's interests.

Berkshire Vice Chairman Charlie Munger said he believes Goldman is the nation's best investment bank in terms of morality and competency. He said vilifying Goldman won't solve the problems created by what he called faulty government regulation of the financial industry. - CBS News Story

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