Warren Buffett Backs Goldman Sachs

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Amid all the uncertainty on Wall Street, investor Warren Buffett is giving a $5 billion vote of confidence to Goldman Sachs. The investment bank is considered to have a relatively strong balance sheet, but its stock has dropped sharply in the fallout of the subprime mortgage disaster.

STEVE INSKEEP, host:

The legendary investor Warren Buffett has been staying away from the troubled financial sector until now. Yesterday Buffett's company, Berkshire Hathaway, said it is putting $5 billion into Goldman Sachs, the giant Wall Street investment firm. NPR's Jim Zarroli has more.

ZARROLI: Goldman Sachs said it will raise seven and a half billion dollars by selling stock. Of that, Buffett's conglomerate, Berkshire Hathaway, will purchase two-thirds of the shares. Goldman is a blue-chip investment bank with what's considered a relatively strong balance sheet, but its stock has dropped sharply in the fallout from the subprime mortgage disaster. The Federal Reserve said that it had given permission to Goldman and Morgan Stanley to become bank holding companies. That will allow the companies to borrow money from the Fed, but it will also subject them to greater regulation.

Buffet's decision to invest in Goldman was announced after the markets closed yesterday. Buffett has a huge following among investors, and his decision to invest in the company is likely to send a signal to the markets that Goldman is getting back on its feet. In a statement yesterday, Buffett said Goldman Sachs is an exceptional institution with a proven and deep management team, and the intellectual and financial capital to continue its track record of outperformance. Jim Zarroli, NPR News, New York.

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