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Buffett betting $5B on Goldman

By Anna Jo Bratton ASSOCIATED PRESS | Wednesday, September 24, 2008

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OMAHA, Neb. (AP) – One of the world's shrewdest dealmakers is betting $5 billion of his investors' money that the U.S. financial system is not about to collapse.

Warren Buffett's Berkshire Hathaway Inc. said Tuesday it is investing at least $5 billion in Goldman Sachs Group Inc., a huge vote of confidence for one of the survivors of the credit crisis that felled two of its investment banking peers.

In addition to buying $5 billion in preferred stock, Berkshire also got warrants to buy another $5 billion in Goldman's common stock. Goldman also said late Tuesday it would raise another $2.5 billion in its own public stock offering.

The news sent shares of Goldman Sachs and stock index futures soaring in electronic trading, after the Dow Jones industrial average posted a triple-digit decline for the second day in a row.

It also could lead to new probing questions from lawmakers for Treasury Secretary Hank Paulson, a former co-CEO of Goldman Sachs. He and Federal Reserve Chairman Ben Bernanke told Congress hours earlier that quick action on a $700 billion bailout measure for financial services firms was needed to prevent economic havoc.

Goldman Sachs' shares had been tumbling ahead of the announcement of the government rescue plan last Friday as investors feared it could face the same kinds of funding squeezes as Bear Stearns and Lehman. Now members of Congress have to deal what may look to many taxpayers like Wall Street is already cashing in.

Buffett, one of the most successful investors in history, did not mention what is happening in Washington, but he did heap praise on the New York-based firm.

"Goldman Sachs is an exceptional institution," the chairman and CEO of Berkshire Hathaway said in a news release. "It has an unrivaled global franchise, a proven and deep management team and the intellectual and financial capital to continue its track record of outperformance."

It will be Buffett's second major foray into Wall Street.