Buffett has ‘great confidence’ in $5B Goldman bet: Berkshire director

A Berkshire director says Warren Buffett is 'not concerned' about his massive investment in the Wall Street giant, despite the stock's recent losses | Adviser chatter: Time to buy or sell GS stock?

Berkshire Hathaway Inc.’s Warren Buffett, who injected $5 billion into Goldman Sachs Group Inc. in 2008, remains comfortable with his investment after regulators sued the bank for fraud, said Berkshire Director Thomas Murphy.

“He’s not concerned with the investment at all,” Murphy, 84, said in a Bloomberg Television interview, citing a telephone conversation with Buffett, Berkshire’s chief executive officer. “He has to see what’s going to happen on it, but I think he has great confidence in Goldman,” Murphy said. The two men spoke after the Securities and Exchange Commission announced its lawsuit on April 16, Murphy said.

Buffett, a longstanding Wall Street critic, has supported a firm that’s become a lightning rod for politicians and people who feel cheated by the recession. Public regard for Goldman Sachs, the most profitable firm in Wall Street history, has plummeted in the year and a half since Buffett, 79, provided the company with capital in the depths of the financial crisis.

“I think he’s awfully secure” in Berkshire’s Goldman Sachs holdings, said Glenn Tongue, a partner at T2 Partners LLC, which invests in Buffett’s firm. “He assessed the culture of Goldman Sachs when he made the investment. He had known the company for decades.”

The SEC accused Goldman Sachs and an employee of misleading clients on the sale of mortgage-related investments. The case focuses on a collateralized debt obligation that yielded a $1 billion payout for hedge fund Paulson & Co. when the CDO lost value. Investor IKB Deutsche Industriebank AG lost money.

Goldman Sachs, led by Chief Executive Officer Lloyd Blankfein, has called the claims in the lawsuit unfounded. Investors who took the opposite position to Paulson were aware of the risk, Goldman Sachs has said.

“The people on the other side, I am told, and I am not a pro on this at all, are very sophisticated buyers or sellers,” Murphy said. “They knew exactly what they were doing.” Murphy’s son, also named Thomas, is a former partner at Goldman Sachs.

“I also have great respect for Goldman,” Murphy said.

Buffett may be called on to address criticism of Goldman Sachs on May 1 when tens of thousands of investors gather in Omaha, Nebraska, for Berkshire’s annual meeting. At last year’s meeting, he countered public anger over the taxpayer-funded bank bailouts by touting Wells Fargo & Co., one of Berkshire’s top holdings and the recipient of $25 billion in aid.

Buffett’s prestige as the world’s preeminent stock picker and his reputation for ethics boosted Berkshire to first place this month in Harris Interactive’s annual survey of corporate reputations. The financial crisis dragged the nation’s biggest banks toward the bottom of the list with Goldman Sachs coming in 56th out of 60. Berkshire gets 10 percent annual interest on the Goldman Sachs preferred shares that Buffett bought in 2008.

Buffett’s investment was partly a bet on the “integrity” of Goldman Sachs, Berkshire director Ronald Olson said last week before the lawsuit.

“When Warren and Berkshire stepped up to make this investment, it was a very strong statement of its belief, his belief, in not just the strength of Goldman but its integrity,” Olson said in an interview with Bloomberg Television.

Murphy, a Berkshire director since 2003, is a former chairman and CEO of Capital Cities/ABC, one of Buffett’s most successful investments in the 1990s. —Bloomberg