Buffett Watch

Warren Buffett Has 'Great Confidence' in Goldman Sachs Says Berkshire Director


We're not hearing it directly from Warren Buffett's lips, but it's pretty close.  He's not worried about Berkshire Hathaway's $5 billion investment in Goldman Sachs.  And it sounds like he has doubts about the government's recently revealed fraud case against Goldman.

Berkshire director and long-time friend Thomas Murphy tells Bloomberg he spoke with Buffett by telephone after the SEC announced its lawsuit last Friday, April 16.  It is accusing Goldman Sachs of fraud for failing to disclose conflicts of interest in subprime mortgage securities it sold in 2007 to investors who wound up losing $1 billion.

In a Bloomberg video clip, Murphy is interviewed by Betty Liu about Buffett's reaction to the suit:

MURPHY: Well, he has to see what's going to happen on it, but I think he has great confidence in Goldman, and he knows it's very sophisticated people on both sides.

LIU:  Did he say anything more?  Did he say anything more about the investment?  Did he say that ...

MURPHY:  He's not concerned with the investment at all.  You know, Goldman is going to be able to pay it back and they're going to be paying 10 percent interest and they (Berkshire) have the option on five million (dollars worth of Goldman) shares at 115 (dollars per share.)  That's pretty good.  Wish I had it. 

LIU:  And did he sound at all concerned?

MURPHY:  No, not at all.  I don't think it's that significant a deal as far as Berkshire is concerned.

Murphy backs Goldman's contention that both sides knew what they were doing in the CDO deal at the heart of the SEC's complaint. "The people on the other side, I am told, and I am not a pro on this at all, are very sophisticated buyers or sellers."

Bloomberg notes that Murphy's son is a former Goldman partner.

Berkshire's warrants to buy Goldman shares have a current value of about $1.8 billion, down over $1 billion in the wake of the SEC's suit.

Goldman current stock price:

Separately, the Wall Street Journal reported this morning that government investigators believe a Goldman Sachs director, Rajat Gupta, improperly told hedge fund billionaire Raj Rajaratnam about Buffett's 2008 investment in Goldman, before it was announced publicly.

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