Warren Buffett, the American investor who in the past has criticised the casino culture that pervades Wall Street, is set to become one of the leading shareholders in Goldman Sachs, the investment bank he backed by taking a stake during the financial crisis. And he won't even have to spend a penny of his own money.
Back in 2008, Buffett's Berkshire Hathaway conglomerate invested billions of dollars in Goldman and in return received warrants allowing it to buy around 9 per cent of the bank for $115 per share by October 2013.
Yesterday, however, Goldman said Berkshire had instead agreed to exchange its potential profit on the warrants for the bank's stock, meaning that it wouldn't have to dip into its cash reserves to become a sizable shareholder with around 2 per cent of Goldman. That would make it – and Mr Buffett – the bank's ninth largest shareholder. "We intend to hold a significant investment in Goldman Sachs," Mr Buffett said yesterday.
The investment adds Goldman to a share portfolio that, despite Mr Buffett's often vocal calls for a realigning of what he once called "unbalanced incentives" on Wall Street, already includes Wells Fargo, Bank of America and the smaller though still sizable M&T Bank.
Recently he has gone on record to defend institutions that he believes have attempted to roll back the excesses and, in the years since the crisis, sought to build up their capital buffers. "The banks will not get this country in trouble, I guarantee it," he told the Bloomberg financial news service earlier this year. "The capital ratios are huge, the excesses on the asset side have been largely cleared out." He added: "Our banking system is in the best shape in recent memory."
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