Bank Of Berkshire America: Buffett To Buy $5 Billion In Preferred Stock In Bank Of America

Tyler Durden's picture

Goldman bailout part 2 is here. And so the Octogenarian of Omaha doubles down on another taxpayer bailout. At least we can put aside all the lies that Bank of America did not need capital. It needed capital: $5 billion of it. It also confirmed it was completely locked out of both debt and equity public capital markets - the bank's only recourse was a private raise with a crony capitalist who is once again doubling down on the global ponzi.

From the press release:

Bank of America Corporation announced today that it reached an agreement to sell 50,000 shares of Cumulative Perpetual Preferred Stock with a liquidation value of $100,000 per share to Berkshire Hathaway, Inc. in a private offering. The preferred stock has a dividend of 6 percent per annum, payable in equal quarterly installments, and is redeemable by the company at any time at a 5 percent premium.

In conjunction with this agreement, Berkshire Hathaway will also receive warrants to purchase 700,000,000 shares of Bank of America common stock at an exercise price of $7.142857 per share. The warrants may be exercised in whole or in part at any time, and from time to time, during the 10-year period following the closing date of the transaction. The aggregate purchase price to be received by Bank of America for the preferred stock and warrants is $5 billion in cash.

We are building the best franchise in financial services and we have laid out a clear plan to deliver long-term shareholder value,” said Bank of America Chief Executive Officer Brian Moynihan. “I remain confident that we have the capital and liquidity we need to run our business. At the same time, I also recognize that a large investment by Warren Buffett is a strong endorsement in our vision and our strategy.”

Bank of America is a strong, well-led company, and I called Brian to tell him I wanted to invest in it,” said Berkshire Hathaway Chairman and Chief Executive Officer Warren Buffett. “I am impressed with the profit-generating abilities of this franchise, and that they are acting aggressively to put their challenges behind them. Bank of America is focused on their customers and on serving them well. That’s what customers want, and that’s the company’s strategy.”

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alexwest's picture

i wonder that is the usury rate? 20- 30 - 50%



ZeroPower's picture

Stock up 24% right now lol what a joke

Pladizow's picture

Irrespective of the company, when there are price moves of this magnitude (25%+), there is something fundamentally wrong!

Fish Gone Bad's picture

Let me get this right.  BAC just got another master.  Looks like this horse can get whipped some more.

Thomas's picture

If we knew the details we would all splatter our screens with projectile vomits.

SWRichmond's picture

I wonder if Buffett thinks this will get him in bed with Becky Quick?

TruthInSunshine's picture

Buffet knows that the economy is CocaColaDairyQueenNebraskaFurnitureMartLicious:


08-25 9:31: Pimco's El-Erian says Bernanke must avoid QE3 in Friday's...

Pimco's El-Erian says Bernanke must avoid QE3 in Friday's speech ECONOMIC COMMENTARY


- should avoid any suggestion the US central bank intends to pursue purchases of Treasury Bonds and instead use a much anticipated Friday speech to press for economic reforms.


The Bernank is lobbying the TOTUS to get El-Erian branded as a threat to national security. 

--In other Recovery Summer™ 3.0 News--:


Foreclosures made up 31 pct. of home sales in 2Q

The Associated Press - 31 minutes ago

Foreclosure sales, which include homes purchased after they received a notice of default or were repossessed by lenders, accounted for 31 percent of the market in the April-June quarter, foreclosure listing firm RealtyTrac Inc. said Thursday.

The share of the market would likely have been larger this spring if not for a state and federal investigation into faulty paperwork by banks and servicers. The probe has led many banks to delay foreclosure sales. Once that is complete, foreclosures will likely surge later this year.


--and even with record low mortgage rates--


New-Home Sales Fall, 2011 Could Be Worst Year In History - ABC News › Money  

2 days ago


---and, just for the big cherry on top, the real unemployment rate is confirmed by yet another source to be higher than 20%--


The Jobless Effect: Is the Real Unemployment Rate 16.5%, 22%, or ?

Raghavan Mayur, president at TechnoMetrica Market Intelligence, follows unemployment data closely. So, when his survey for May revealed that 28% of the 1,000-odd households surveyed reported that at least one member was looking for a full-time job, he was flummoxed.

"Our numbers are always very accurate, so I was surprised at the discrepancy with the government's numbers," says Mayur, whose firm owns the TIPP polling unit, a polling partner for Investors' Business Daily and Christian Science Monitor. After all, the headline number shows the U.S. unemployment rate today is 9.5%, with a total of 14.6 million jobless people.

However, Mayur's polls continued to find much worse figures. The June poll turned up 27.8% of households with at least one member who's unemployed and looking for a job, while the latest poll conducted in the second week of July showed 28.6% in that situation. That translates to an unemployment rate of over 22%, says Mayur, who has started questioning the accuracy of the Labor Department's jobless numbers.

Bananamerican's picture


"Black Tuesday, 1929. A wind came by and blew a few cards off the house of said cards. People saw stocks were actually falling (something they hadn't done in a long time) and the trendreversed. People hurried to get out of stocks and minimize their losses. As this happened, more people did the same which exacerbated the situations.

J.P. Morgan made a valiant effort to save the economy by putting the modern equivalent of tens of billions of dollars into certain banks, but to no avail. Folks wanted out quickly at whatever cost."

nope-1004's picture

Wow.  I just love the incredible foresight and knowledge this wise ol' investor has.  It's truly amazing.  He meets with Obama, then has the one-in-a-million vision to invest in BAC, a wholly insolvent entity.

It takes courage people for someone with such incredible investments skills to invest in an insolvent bank.


Warren's a bankster thug.  It's easy to tithe your excesses as he does and garner adoration on the surface, meanwhile under the radar you help manipulate this gloriously free market.

I'm ready to puke.  Thug.

Freewheelin Franklin's picture

I wonder if Buffett thinks this will get him in bed with Becky Quick?



Been there, done that.

Mercury's picture

They essentially took Cramer's advice proffered a couple days ago:

"Find a billionaire to vouch for you..."

Citxmech's picture

So did Berkshire have $5 billion in cash "just sitting there," or did they have WF print it up for them? . .

NotApplicable's picture

Probably took it from their loan loss reserves, knowing they won't need them. *wink, wink, nudge, nudge*

Sancho Ponzi's picture

He had about $48 billion in cash

I think I need to buy a gun's picture

doesn't bofa own merrill lynch who is a bullion bank


maybe this is a backdoor gold buy right before open market operations in gold very shortly

Cognitive Dissonance's picture

Looks like Warren's BAC botox inject will work for a while. Can't wait to see what happens tomorrow in Jackson Asshole. It seems to me that there are a lot of poeple on one side of the boat.

Don Birnam's picture

Hold the phone !

"Becky" Quick is calling in live on CNBC -- ostensibly from her maternity leave/breast feeding session with the new Junior Quick -- and reporting on Uncle Warren's exercise in senility. These two are curiously -- and unsettlingly -- joined at the hip.

Cognitive Dissonance's picture

What's wrong with a Dec 29th/April Fool relationship? And who said the Junior Quick is who we assume he is? The world is full of stranger bedfellows than these. :)

Don Birnam's picture

Ha -indeed, CD.

Touche ! 

Junior Quick ? There is a curious resemblance, though...

Cognitive Dissonance's picture

I can't wait to see the pictures of Junior Quick so we can compare them to Warren.  

Baby Warren

SheepDog-One's picture

Try adding horns and hooves to the above, then youre closer.

FEDbuster's picture

Becky should have stuck to blowjobs for interviews.  One too many rum and Cherry Cokes on the plane to China?

Founders Keeper's picture

Becky Quick is out on maturnity leave?

GET OUT of here.  She was pregnant?  I'm serious.  Oh, the magic of Hollywood.


Founders Keeper's picture

Hi CD.


And one has to wonder how Warren's "investment" has been backstopped by the US taxpayer.



Sig Sauer's picture

thinking the same thing....wasn't it earlier this week or late last week the Teleprompter in Chief was said to have called Buffet?

Founders Keeper's picture

You remember correctly.  Thinking the same.

(Green arrow for your sidearm.)


Cognitive Dissonance's picture

I see it now that I'm squinting at your Avatar. Tyler needs to put in bigger Avatar's or this old man needs better eyes. I love how smooth the Sig action is. Nothing like it.

SokPOTUS's picture

Yep.  He already knows the bailout terms are finalized.

FEDbuster's picture

At least the old fart understands "Too Big To Fail".  Granted he squeezed them pretty good 6% + 700K in the money warrants, but when B of A goes down and the government steps in to save them, Warren will be at the front of the line.  Warren also said, "this is an investment in the United States".  He wants it to look like he is the brave captain of capitalism willing to go down with the ship.

Founders Keeper's picture

"At least the old fart[Warren] understands "Too Big To Fail".  Granted he squeezed them pretty good 6%..."

Are we still talking about Becky Quick?


FEDbuster's picture

I thought we had moved on to "bailouts". 

Becky is just looking to quit her day job, when Uncle Warren sets up a trust fund for the little bastard. 

BTW, does Zerohedge make some money everytime I click on the "Obama 2012" ad?  Does Obama's campaign fund pay for the ads or is Google giving them ad space for free?  The fucking asshole comes up about every third page.

antaresteleko's picture

Hi folks, this is my very first comment at ZH, and I have to say that by no means I am an expert in finance... so please be gentle with me...;-)

Just wondering: that preferred stock 6% dividend per annum, couldn't it be that 6% dividend comming from the equity share BAC owns from the FED? Could it be possible that there is some private agreement for Berkshire Hathaway to own the dividend rights that in turn BAC has on their share of the FED? In that case, if finally BAC crashes Warren Buffet would have secured a very good damm deal... 

I know I came a bit late into the conversation but... any thoughts?


fx's picture

there is no need for any backstop. The warrants themselves have a value far above the 5 bn Buffet paid for the preferreds - and he gets those 5 bn back with interest! So Zh was obviously right that BAC was really in desperate need of cash. I wonder what Bruce Berkowitz thinks about all this. I could imagine he has a lot less sympathy now with BofA's CEO. I mean, he made a public cc with Moynihan and now the whole world can see how he (and all other listeners) got bullshitted to the hilt. And Buffet got such stunning terms. I mean, he could at least have asked Bruce if he wanted to participate with a couple hundred million $ , no? but perhaps he has...?!

AccreditedEYE's picture

Total BS. First of all, he picks NOW to get involved in Bank of Countrywide Merrill Lynch. Forget about the fact that is against all of his investment "criteria". So much for being a long term investor... this is a trade pure and simple. Just like Goldman was. He throws his name and money around knowing the equity will get goosed. Except, you better watch out this time Uncle Warren... this ain't The Squid. There's LOT's of bodies buried around this dump of a stock. This may be the one that finally tarnishes your name.

HoofHearted's picture

Other sources are reporting this is 50,000 preferred shares at 100,000 apiece with a 6% dividend. Shows how desperate BAC is. I just shorted at 8.60, and I'm already making some fiat. Everyone will recognize that it took this sugar daddy to save BAC so that Buffett can help his buddy Obama out. They've got Soros left, but how many other billionaires out there will do what they can to save O's arse?

AccreditedEYE's picture

Congrats on the fiat. After the ass-rape that the SWF's took injecting capital WAY TOO EARLY into the banking system last time, the bastards can't count on that this time either. Europe will trigger everything.

PS- thanks for the hat tip Uncle Warren... now we know we REALLY have a tsunami coming if you're touching this POS.

Translational Lift's picture

Article lead-in says it all.....Goldman bailout part 2 is here.

Unfortunately.....This like giving artificial respiration to a drowning victim......may get the heart going but the victim is still brain dead.....

strannick's picture

I remain confident that we have the capital and liquidity we need to run our business.

-So you can scrape together enough cash to keep the lights on? Now theres a glowing endoresment if you ever heard one.

"At the same time, I also recognize that a large investment by Warren Buffett is a strong endorsement in our vision and our strategy.”

-Uncle Warren getting in at loanshark rates isnt a strong endoresment. Its desperate times calling for desperate measures.


FlyPaper's picture

Damn right Uncle Warren is getting loanshark rates - and how do the stockholder of BoA benefit from 700 million warrants?   

Warren's no dummy, and likely there is some kind of discussion with the Fed and Treasury for bailout of BoA hence Warren is investing in a government guaranteed company and getting a great return, while the taxpayers are on the hook for the results of the "Strategy"....

Could turn out to be a very smart move for Berkshire.

The major risk I see is if BoA is "WAMU'd" into good assets in a bankruptcy.  I don't think citizen sentiment is where it was in 2008... hence objections may abound.


septicshock's picture

Does anyone else feel like zero hedge gets it wrong as much as it gets it right?

Gully Foyle's picture

I here that. Virtually no mention of Jimmy Buffet.

Dr. Richard Head's picture

Wasting away again in Bank of Americaville. 

Looking for my bailout of stock.

Some people claim that it's an insider trade.

But I know, Uncle Sam can be bought. 

Gully Foyle's picture


Have you seen what Ray Stevens has been doing?

Ray Stevens - Obama Budget Plan


And then there is this

Wasting Away in Obamaville

Taxing the rich
I know there’s a hitch
All of those Gulf waters smothered in oil
Beatin’ my Racism drum
Singin’ my immigration hum
Smell those voters they’re beginnin’ to boil

Wastin away again in Obamaville
Searching for my lost majority
Some people claim that there’s a Bush to blame
But I know it’s my own naivete

I don’t know the reason
I stayed here all voting season
Nothin to show but higher unemployment
My wife left for Spain
Spending those tax dollars in vain
All I’ve got left is disappointment

Wastin away again in Obamaville
Searching for my lost majority
Some people claim that there’s a Bush to blame
But I know it’s my own naivete

I blew out my mandate
Hoping it was Pelosi and Reid voters would hate
But now I know they’re too smart for that
I hope there’s life in my lies
And that people don’t realize
The truth before November

Wastin away again in Obamaville
Searching for my lost majority
Some people claim that there’s a Bush to blame
But I know it’s my own naivete


Stoploss's picture

Are you too retarded to tell the difference between a green arrow and a red arrow?

Gully Foyle's picture

The Green Arrow is Oliver Queen and Red Arrow is grown up Speedy.

Gully Foyle's picture

What tactless twat would junk a DC comics reference? Especially one regarding classic characters. For fucks sake Speedy was a JUNKIE! A Goddamned junkie who clawed his way back into the hero's pantheon.