ALEX CHADWICK, host:
From NPR News it's Day to Day. With all the government talk of a bailout for Wall Street, a private investor comes to the rescue, today. Not just any investor, it's Warren Buffett. He is giving Goldman Sachs a $5 billion cash infusion. Some other investors are following his lead, bidding up the Goldman stock. Marketplace's Nancy Marshall-Genzer joins us. Nancy, so why is Warren Buffett so confident about Goldman Sachs, which was the subject of a lot of grim news?
NANCY MARSHALL-GENZER: It certainly was. The big thing is Buffett thinks he's getting a good deal. Goldman stock has been beaten down, along with other financial stocks, and Buffett is buying $5 billion in preferred Goldman stock. He's also got warrants to buy another $5 billion in common stock at a set price, a very good deal.
And Goldman got a lot more attractive after the government let it change its status to a bank holding company, and basically that gives it permanent access to Fed funds. It can borrow money a lot more easily from the Fed. I talked about this with Ralph Shive and he's chief investment officer at 1st Source Bank. He says Buffett's confidence is partly due to Goldman's new status as a bank holding company.
Mr. RALPH SHIVE (Chief Investment Officer, 1st Source Bank): I think that really helps cement the situation that that federal government wants them to stay alive, and is going to allow them into the banking system.
CHADWICK: I'm sorry, is there any suspicion that Warren Buffett is just giving Goldman a show of support, and that's designed to just make all the other investors feel a little more confident about the situation overall?
MARSHALL-GENZER: You know, there really is, and he's a businessman. As I said, he feels he's getting a great deal. He also says he's confident in the management at Goldman Sachs. In a statement Buffett said it had a, quote, "proven and deep management team."
CHADWICK: So, still, maybe his confidence is going to make others feel better?
MARSHALL-GENZER: Very well could. I, you know, there is still a lot of uncertainty on Wall Street, but this is definitely a vote of confidence in Goldman Sachs, and some investors are starting to look at other financial stocks. And Georgetown University associate finance professor, James Angel, told me that Buffett is one of the nation's most respected investors. So, it's only natural that people are going to follow his lead.
Professor JAMES ANGEL (Associate Finance Professor, Georgetown University): Sharp investors are sniffing around the wreckage of the credit crunch looking for good deals. There are a lot of distressed sellers out there who have to get rid of these assets, and they're desperate to raise capital.
MARSHALL-GENZER: Now, Alex, there are a lot of good deals out there, but you have to do your homework, Angel says. And of course nobody wants to do that, it's just easier to do what Buffett does and peep over at his homework.
CHADWICK: How about these reports we see that the FBI is investigating the economic crisis and things that have gone wrong. Who's being investigated?
MARSHALL-GENZER: Yeah. Apparently the probe includes Fannie Mae, Freddie Mac, Lehman Brothers, and the insurer American International Group. The FBI is reportedly investigating potential mortgage fraud, possibly involving the companies and senior executives who've been at the center of the whole financial crisis.
CHADWICK: We'll follow that. Thank you, Nancy, Nancy Marshall-Genzer of public radio's daily business show, Marketplace.