Ever wonder what billionaires think about while alone in the bathroom? Apparently they dream up multi-billion-dollar deals to help shore up the biggest bank in the United States.
Everyone’s favorite billionaire, Warren Buffett, is back in the news today (does he ever really leave?). This time the candid investor and CEO of Berkshire Hathaway is investing $5 billion in Bank of America. In exchange, Berkshire will get 50,000 preferred shares in the bank.
And where did this bright idea strike Buffett? According to interviews, the third-richest man in the world dreamed it up while taking a bath. The man who likes baths loves deal-making more. Buffett, who helped out GE and Goldman Sachs in similar deals in 2008, loves to take advantage of opportunities like these.
Although BofA has said that it doesn’t need to raise capital, the big gift from Buffett probably couldn’t have come at a better time. Since the beginning of the year BofA’s stock has fallen (nearly 50%) before today’s bump from Buffett. And the bank is plagued by bad mortgage loans, lingering litigation stemming from the sale of mortgage-backed securities.
Although the $5 billion investment isn’t the answer to all of Bank of America’s problems, it does prove that at least one very savvy investor believes in the company’s earnings potential. Buffet’s bold move in a rather tumultuous market also is being viewed as not only a vote of confidence in Bank of America and the US banking industry, but as a vote of confidence in the country as a whole.
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