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Warren Buffett will invest in Bank of America
Warren Buffett, Chairman and CEO of Berkshire Hathaway, looks on while testifying before the Financial Crisis Inquiry Commission (FCIC) at The New School June 2, 2010 in New York City.
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Stacey Vanek-Smith: Bank of America stock is up 13 percent this morning. And you can chalk that up to the Buffett Bump. Billionaire Warren Buffett announced today that he's investing $5 billion in the beleaguered bank, calling it a strong and well-led company. B of A's stock has dropped nearly 40 percent in the last 3 months. Why is Buffet's word enough to turn it around?
We asked Marketplace's Nancy Marshall Genzer to find out.
Nancy Marshall Genzer: This isn't the first time Buffett has given Wall Street a helping hand. He took a big stake in Goldman Sachs during the height of the financial crisis. Goldman was able to tell investors, "Hey, Uncle Warren likes us, you should, too." Now Bank of America gets Buffett bragging rights.
Nancy Bush is a bank analyst at NAB Research. She says Buffett has built a valuable brand around himself and his company, Berkshire Hathaway. He's a combination of Midwestern common sense, and big money.
Nancy Bush: The aura of money making takes on a life of its own. The shareholder letter, the meetings with Berkshire Hathaway shareholders in Omaha. He is seen as a nexus of money.
Bush says the Buffett brand is so powerful it'll spark a rally in other bank stocks. She says they've been beaten down by the same rumors that battered Bank of America shares. As investors fretted about toxic mortgages on banks' books. Many financial stocks are now at bargain levels.
In Washington, I'm Nancy Marshall Genzer for Marketplace.
I wouldn't follow Buffet into BofA. His last big investment in Goldman wasn't so great. He would have lost his A$$ if they hadn't had TARP and bailed out AIG.
Also, for the record, Buffet himself pays a lower tax rate than his secretary because he doesn't take a salary and instead is paid in divdends. The salary he doesn't take, becomes profit at Birkshire and is taxed at the corporate rate.
He is such a great believer in the American Dream, Why,With all of his money is he giving it to BOA? So they can hire more people to kick down on the luck homeowners out of their homes? Why dosn't he take a few billion put it into a non profit and help people who have been lied to by BOA to help them keep their houses. It would be a write off so he dosn't have to pay as much in taxes as his secretary, i know he needs the break
