Goldman’s Problems Continue with Threat of FCIC Derivatives Audit

Despite paying the largest penalty ever assessed against a financial firm by the Securities and Exchange Commission, Goldman Sachs is still an attractive target for government panels investigating the financial crisis. Goldman agreed to pay a $550 million settlement on July 15 in connection with the Abacus case in which the SEC alleged that Goldman failed to disclose key information regarding the portfolio selection process. Today, the Financial Times reported that Goldman is facing a separate inquiry by the Financial Crisis Inquiry Commission (FCIC) regarding the company’s use of derivatives.

Buffett Gives Goldman Sachs Another Vote of Confidence

Buffett Gives Goldman Sachs Another Vote of Confidence

Berkshire Hathaway’s investment in Goldman Sachs at the height of the financial crisis represented a major vote of confidence that enabled Goldman to raise additional equity from investors. The September 2008 deal involved $5 billion in Goldman Sachs perpetual preferred stock along with five year warrants to purchase approximately 43.5 million shares of Goldman common stock at $115 per share. The preferred stock carries a dividend rate of 10% and is callable at any time at a 10% premium. Despite the recent drop in Goldman Sachs common stock, Berkshire’s warrants remain in the money. While Goldman could almost surely refinance Berkshire’s $5 billion investment at a lower rate, having Warren Buffett’s endorsement in the current environment may be priceless. Read this article for more details.

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