BUFFETT'S BANK OF AMERICA DEAL, THE “BAILOUTS” – and OBAMA?
Let's examine Warren Buffett's latest investment in B of A (BAC). As reported in the WSJ today, he virtually forced CEO Bryan Moynihan into an agreement for him to invest $5 Billion in the bank. To understand this deal, it is informative (even necessary) to look back at the bank “bailout” by taxpayers, although taxpayers had no voice in the matter. Conditions of the bailout required BAC to suspend dividends on common shares to near zero, a token amount. Many people, especially seniors who had all their lives depended upon the stability and safety of bank stocks, as well as utilities, took a hard financial hit. BAC shareholders lost both their capital and their income. I know some of these people. It has been devastating! BAC shares currently yield 0.6% dividends!
Now comes Buffett, the “consummate wise investor.” He cuts a deal for a special preferred stock that will pay him 6% dividends when MONEY IS DIRT CHEAP.
Yeah, this is “smart” investing, but does anyone doubt the rest of the story. Being a friend of Obama and an advocate for the president's tax increases undoubtedly makes it even easier to be smart. Oh, but maybe Buffett will use the extraordinary dividends to pay the extra taxes he “wants to pay.” Don't hold your breath and don't bet the bread money on it. I don't discount Buttett's investing acumen, but his hypocrisy and crony capitalism should be revealed along with the president's actions -- for what they really are.
That reminds me of the GM deal and “saving the auto” industry (for the UAW)...but that's another story.