CNBC: Buffett to CNBC: Berkshire Talking to 5 Firms About Buying Tax Credits

Published: Wednesday, 4 Nov 2009 | 12:09 PM ET

By: Alex Crippen
Executive Producer

Getty Images Warren Buffett

Warren Buffett tells CNBC's Becky Quick that Berkshire Hathaway has talked to five big financial firms about buying their tax credits.

Buffett says he can't name any names due to confidentiality agreements, but notes that Berkshire has been buying tax credits since 1990 and will continue to do so in the future.

This morning's Wall Street Journal reports Berkshire has joined with Goldman Sachs

GOLDMAN SACHS GROUP INC GS 172.81 1.20 +0.7% NYSE

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[GS 172.81 1.20 (+0.7%) ] in an effort to buy $3 billion in tax credits from Fannie Mae

FANNIE MAE FNM 1.11 -0.04 -3.48% NYSE

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[FNM 1.11 -0.04 (-3.48%) ], the big government owned mortgage company.

The Journal says Buffett's involvement "adds a twist to what was already a politically sensitive deal." The paper says the Treasury Department is "considering blocking any potential sale on the grounds that it wouldn't benefit taxpayers" since any money earned by Fannie would be offset when the buyers used the tax credits.

What used to be a "simple deal" in years past is now "fraught with political calculations, such as the perception of aiding a Wall Street giant at a time of popular anger against bankers."

Buffett's reputation could help shield Goldman from criticism of a deal. Buffett has a long-standing relationship with Goldman, including his very profitable $5 billion investment in the firm last fall at the height of the credit crisis.

The sale of tax credits by firms unable to use them is the result of a government program started in 1986 to encourage the construction of low-income housing.

The Journal says the recession has reduced demand for the tax credits because potential buyers no longer had profits that needed to be protected from taxes.

While demand is beginning to pick up as the economy starts to rebound, developers say credits are being sold for between 65 and 79 cents on the dollar, making them very attractive to buyers who do have profits that could be shielded.

Current Berkshire stock prices:

Class A:

Berkshire Hathaway Inc Class A Stock BRK.A 101705.00 UNCH 0 NYSE

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[BRK.A 101705.00 --- UNCH (0) ]

Class B:

Berkshire Hathaway Inc Class B Stock BRK.B 3382.48 57.1299 +1.72% NYSE

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[BRK.B 3382.48 57.1299 (+1.72%) ]

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