Net Net: Promoting innovation and managing change
Net Net: Promoting innovation and managing change

Does Warren Buffett Think the Government Would Rescue Bank of America?

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A lot of people have wondered about the haste with which The World's Greatest Investor Warren Buffett decided to buy $5 billion of preferred equity and warrants from Bank of America. To hear the Oracle tell it, the idea came to him in the bathtub. Not too long later he was dictating terms to the bank.

How is it that Buffett can be so confident in Bank of America when so many others have questions about the bank's liabilities for soured mortgages and about the values of its mortgage assets?

Here's The Atlantic's Daniel Indiviglio on the investment:

This may be more of a bet that the government hasn't actually solved the too big to fail problem and would rescue the bank again if it got into trouble.

Daniel points to a column in the Washington Examiner by my brother Tim:

When Wall Street nearly collapsed in September 2008, Buffett rallied behind the Troubled Asset Relief Program, and bet big on its passage.

He put $5 billion into failing investment bank Goldman Sachs. "If I didn't think the government was going to act, I would not be doing anything this week," Buffett said on CNBC at the time.

So, does Warren think Bank of America is still backed by the government?


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