Warren Buffet, capitalist titan, just another pig at the government trough.

The capital doesn’t come cheap, but remember, the era of cheap capital is over. Especially now, there is a lack of it.

And I wouldn’t discount Buffet’s actions as a mistake. He’s buying a top-class bank “on the cheap” and probably is not expecting the end of the world in the next year or two. A slow-down/recession yes, but not a disaster. I would agree that chances are good that the worst will be avoided!

Uhhh, this sale of perpetual preferred to Berkshire IS delevering, isn’t it? You can delever by selling assets, or by raising capital. Looks like Goldman has chosen the latter appraoch (or more likely, BOTH).

What kills me is the cost. This looks like ENORMOUSLY pricey capital — the sort of terms that venture capitalists might impose on a bunch of techies working in their garage.

If last-man-standing GS has to pay this much for a capital infusion, it screams EMERGENCY, loud and clear.

How the hell are the weaker players going to raise capital at ANY price? Oh wait, I forgot: government to the rescue! Me so bearish …

He’s making 10% fricking percent with a free 5 year call option in the money.

As we head into a depression, which will last more than 5 years, I would bet all banks, including Goldman trade much lower than their current share prices.

Look at a 10 year chart of most banks, they have gone nowhnere. JP Morgan, one the better managed national banks, failed to exceed it all-time high reached in 1999. This includes its share price performance prior to the onset of current credit crisis.

Goldman gets diluted and faces a global depression. I don’t see how this helps the equity.

Granted, Buffett will get his 10% barring a bankruptcy. So for 10 frickin percent annual return we are calling it the deal of the century.

Count me on the short list that are less favorable on the deal.

i finally wised up in ‘91 (berkshire by then at $7000), and so as a shareholder for 17 years and a wannabe shareholder for 21, my immediate reaction to the move was: this is great for us.

as for goldman, i guess my attitude is, these guys have proven themselves the smartest of the investment banks, and i don’t doubt that they will be the smartest of the bank holding companies.

i suspect most of buffet’s money will be used to buy up commercial banking assets, and regardless of how expensive it may look as capital, it was available and brought a very, very smart guy into the decision-making mix, and therefore was seen by goldman as very reasonably priced in comparison to the alternatives.

With well over $33 billion in goodwill fun money, this guy will be right in line to swap Level 3 crap in exchange for taxpayer cash!

All investment banks were marketing these kind of structure (deep OTM puts or barriers on banks or baskets of banks) in 2007, not just Goldman. No one really knows if they were keeping the position naked or just offloaded the opposite solution to another counteparty.

(a) its absolutely clear that this is indeed equity for federal income tax purpsoes

(b) whether “buffett” bought it through BH or some other C corporation

see, then the 14% return implicit on this would be subject to the dividend exclusion so after tax its an even better deal than it seems; its the equivalent of a bond paying 25% more or less.

Per Scott above, Goldman did this deal on terms that are incredibly rich for Berkshire. The only way I can see that this goes bad for Berkshire is if Goldman has to avail itself of some as yet devised government facility and Buffett’s paper gets retraded. Not impossible, but not immediate and not high odds of that either.