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.

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.

About the author

Nancy Marshall-Genzer is a senior reporter for Marketplace based in Washington, D.C. covering daily news.

Comments

I agree to American Public Media's Terms and Conditions.
With Generous Support From...