Warren Buffet's Goldman Sachs Deal Backed By Treasury

Man, Warren Buffet is one seriously smart cookie. First off, he works over Goldman Sachs in a monumental finance deal (*terms summarized below)... And now today, the government has somehow managed to make the deal even sweeter. Because today, Paulson announced that the Treasury would be buying stock in banking entities that needed cash (Goldman Sachs), at interest rates not required by mobsters (Warren Buffet).

As noted by the Wall St. Journal's MarketWatch.com, "Paulson went out of his way to say existing shareholders would be protected." So Goldman can borrow and not worry about nationalization, which would have been a serious stockholder bummer. Got Cash Problems?... Not anymore!!

So what does this have to do with Warren Buffet? This means he is holding Goldman Sachs corporate debt paying 10%, with stock warrants and a buy-back premium... WITHOUT ANY RISK!! The government has his back. And the government has a big fat wallet.

Gee, who'd have thunk Paulson would come up with some plan that saves the remaining risky banks (Goldman Sachs), without too much harm done to the stockholders (Paulson)?... Man, Warren Buffet - Brilliant!

*Terms: He loaned them $5 billion dollars at 10% interest ($500 million every year forever). Obviously, this is way more than Goldman Sachs normally pays for debt, but they needed liquidy, and they needed it immediately. Oh, so in addition to that, if Goldman every wants to rebuy the debt, they must pay a 10% premium. One last thing, Buffet also received a warrant to buy $5 billion in Goldman Sachs stock for $115 a share at any time over the next five years. Sure, it's low now like everyone else, but seeing $200 a share a couple years down the road doesn't seem that unrealistic.

** Disclosure: The writer has stock in almost all of the above mentioned parties, and is also a taxpayer. Meaning he's happy and pissed. YAY-BOO!! He also thinks, generally speaking, it's a good plan :-)