Is Warren Buffet insane?

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Bank of America got a huge bailout package of about $20 billion in 2009. So, then it paid over $4 billion in bonuses less than a year later. So, essentially you and I gave money to BofA for gifts to their employees.

And now, Warren Buffet is rewarding their spending habits by giving them $5 billion.

If I squander your money, will you keep giving me more? That seems to be what Buffet is doing.

[bjl584]

Absolutely not.

For his $5 Billion dollar investment he gets a guaranteed 6% return plus the option to buy 75 million shares at a huge discount.

He will make a fortune on this deal.

[rj.phila]

i believe he is buying preferred shares, no? you mean insanely lucky to lock in 6% return on $5B?

[Slug]

Look over the deal terms. His return will be excellent. However, that is no suggestion you piggyback on it.

[Petunia 100]

Bank of America got a huge bailout package of about $20 billion in 2009. So, then it paid over $4 billion in bonuses less than a year later. So, essentially you and I gave money to BofA for gifts to their employees.

And now, Warren Buffet is rewarding their spending habits by giving them $5 billion.

If I squander your money, will you keep giving me more? That seems to be what Buffet is doing.

Warren Buffet isn't giving B of A $5 billion; he's investing $5 billion because he believes it will be profitable for him to do so. Those are two entirely different things.

[krantcents]

He bought preferred stock which is very different than giving them money.

[Krazykat]

He's a risk investor I thought and has made a lot of money that way too.

As for BOA, I thought they paid back the BO money?

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Warren Buffet isn't giving B of A $5 billion; he's investing $5 billion because he believes it will be profitable for him to do so. Those are two entirely different things.

I was being sarcastic because I'm not a BofA fan.

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As for BOA, I thought they paid back the BO money?

They did, but their motive was not altruistic. As long as the bank still had the bailout money, they were under restrictions as to how much they could pay their executives, so it was in the upper management's best interests to pay back the money so they could give themselves an inflated paycheck, which is part of the reason they needed the money in the first place...

[Petunia 100]

I was being sarcastic because I'm not a BofA fan.

I'm not either. Investing, particularly value investing (which is what WB does), has nothing to do with emotions or opinions. It's all about the numbers.

[jpg7n16]

Bank of America got a huge bailout package of about $20 billion in 2009. So, then it paid over $4 billion in bonuses less than a year later. So, essentially you and I gave money to BofA for gifts to their employees.

And now, Warren Buffet is rewarding their spending habits by giving them $5 billion.

If I squander your money, will you keep giving me more? That seems to be what Buffet is doing.

I thought they paid back the BO money?

They did, but their motive was not altruistic. As long as the bank still had the bailout money, they were under restrictions as to how much they could pay their executives, so it was in the upper management's best interests to pay back the money so they could give themselves an inflated paycheck, which is part of the reason they needed the money in the first place...

Sorry, I see a discrepancy here - you're irritated that they paid out bonuses, using money they got from the bailout - but then you say they paid all the money from the bailout back. You say that BofA gave our money as bonuses, but then you say they gave our money back. So wouldn't that mean that the bonus was paid using BofA money, not bailout money?? And you said they needed the bailout to pay the bonus, but if they paid it all back, did they really need it at all?

Why then is there an issue with Buffett investing in a company who made enough money to pay out large corporate bonuses?


Your logic in this thread makes no sense to me.

[Frugal]

I don't think he is insane at all. He will definitely make money on this one. Interesting it was reported the president called him up before he shelled out all this money trying to rescue Bank of America from the brink of collapse.

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Something puzzling is that Buffet is also a huge Obama fan and will host a fundraiser that reportedly can cost up to $38,500 per guest. It's safe to say that I won't be attending that one.

The biggest concern is that any bad practices or decisions that BofA has made/is making/will make will probably continue because they keep getting bailed out. Therefore, they have no reason to run their business more efficiently.

If you or I make a bad investment or decision, it costs us, and we'll use that information to make better decisions in the future. However, BofA can pretty much do as they please, because they're too "big" to fail. Obviously, Buffet is not the government and can do as he pleases, but when the government bails out a company, it interferes with capitalism. Federal funds are much more deserved by victims of disaster than by bad bank decisions.

[Krazykat]

I don't think he is insane at all. He will definitely make money on this one. Interesting it was reported the president called him up before he shelled out all this money trying to rescue Bank of America from the brink of collapse.

Where was that reported? I mean, it wouldn't surprise me but I didn't hear that. I don't think Buffett would just throw away that kind of money so he must have been considering beforehand if it did happen that way.

[DaveInPgh]

Awesome investment by Buffet that will eventually benefit the Gates Foundation.