Buffett stands behind Goldman
He supports the bank's CEO and says he'll hold on to his $5 billion investment in the company.
OMAHA, Neb. - Berkshire Hathaway Inc. chief executive officer Warren Buffett declared his support Saturday for Goldman Sachs Group Inc. CEO Lloyd Blankfein, saying he has no plans to sell his company's stake in the bank.
Buffett and Berkshire vice chairman Charlie Munger praised Goldman before a crowd of about 40,000 at Berkshire's annual shareholder meeting.
Both executives said they were happy with Blankfein's leadership. They also said they did not view the Securities and Exchange Commission's charges of civil fraud against Goldman as a strike against him.
"There's really no reason to think about somebody else running Goldman," Buffett said. The charges filed April 16 have raised questions about Blankfein's tenure.
Buffett previewed his company's first-quarter earnings report at the meeting at Omaha's Qwest Center. He said Berkshire rebounded from last year's first-quarter loss and earned $3.6 billion as the economic recovery began and Berkshire absorbed the Burlington Northern Santa Fe Corp. railroad.
The full report will be released Friday. In the first quarter of 2009, Berkshire lost $1.5 billion.
The addition of Burlington Northern more than doubled the income of Berkshire's regulated-businesses unit to $555 million in the January-to-March period. The unit also includes utilities, which, along with railroads, operate under government regulations.
Buffett said Berkshire's quarterly results showed that the economy was improving, as its income from manufacturing and retail grew 85 percent to $477 million.
Berkshire's assortment of businesses, including clothing, insurance, furniture, utility, jewelry, and corporate-jet companies, gives Buffett insight into the health of the overall economy. Berkshire also has big investments in companies including Coca-Cola Co. and Wells Fargo & Co.
Last year's loss included $241 million on the sale of investments. Berkshire also took a $1.9 billion charge from writing down a ConocoPhillips investment.
Buffett has been one of Goldman's biggest supporters before and since the SEC filed its civil lawsuit against the bank. The government charged that the investment bank misled investors about a deal involving complex mortgage-related investments that later plunged in value.
During questioning by shareholders, Munger noted that the SEC vote to file the charges was 3-2. He said that if he had been a member of the SEC, he would have voted against the suit.
Buffett and Munger voiced confidence in Blankfein.
"There are plenty of CEOs I'd like to see gone in America, and Lloyd Blankfein is not one of them," Munger said.
On Friday, Goldman stock plunged 9 percent on reports that the Justice Department had opened a criminal investigation of Goldman.
Buffett said Berkshire's $5 billion of preferred stock in Goldman was a good investment because it produced 10 percent interest a year. He said the investment included warrants that could convert the preferred shares into regular stock at $115 a share, a discount from Goldman's current price of $145.20.
"We love this investment," Buffett said.