Goldman Sachs CEO Lloyd Blankfein had a long chat with Charlie Rose last night on Bloomberg TV, and a portion of the interview was dedicated to something you’ve probably imagined but will probably never do — borrowing money from Warren Buffett.
You’ll recall that during the darkest days of the financial crisis, Buffett loaned Goldman $US5 billion. Not a lot of money for either side all things considered, but certainly a risk considering the times.
For his trouble, the bank gave Berkshire Hathaway warrants to buy 43.5 million Goldman Sachs common shares at $US115. Buffett made more than $US3 billion off this deal by the time it was all said and done last year. That’s when he gave up his option to purchase more shares in exchange for a stake in Goldman.
Back to last night:
“So you took $US5 billion of his money, didn’t you,” Rose asked Blankfein.
“I borrowed it, yes,” Blankfein responded. “I wish I had taken it, but unfortunately, I had to give it back.”
Blankfein went on to say that negotiations lasted 35 seconds. Buffett outlined the terms — something Goldman was in no position to do — and they were “reasonable” anyway.
“But, I mean, why did you make the deal,” asked Rose, “because you needed the money or you needed the idea of his confidence?”
“I needed both. The fact of the matter is a number of people came to us after,” said Blankfein. “…now, this was — this was the week after Lehman Brothers when everybody was fretting about whether the capital markets were open. And this was before TARP. And we did a transaction with Warren Buffett… And the very next day did a common equity deal in the market so the markets were open to us. And with Warren’s money, we got more than just money. We got the validation of somebody who’s regarded as a terrific — as a terrific investor and somebody who knew our firm….People called us up afterwards and said, “Gee, I would have done that.” That would have been great, but with you, I would have just gotten money. With Warren, I got something that was more important.”
Watch the full interview below: