Thursday, October 21, 2010

Goldman Sachs Ready To Part Ways With Buffett

Maybe Goldman Sachs really is the home of the smartest people on Wall Street.  They're preparing to pay back one of their toughest creditors:

Goldman Sachs Group Inc. is considering paying back a $5 billion investment from Warren Buffett's Berkshire Hathaway Inc. that bolstered the securities firm during the worst of the financial crisis, according to people familiar with the situation.

Mr. Buffett got one awesome deal when he bought Goldman's preferred.  Goldman's new math is that the present value of all those perpetual future dividend payments exceeds what it would cost right now to pay him to go away.  Maybe Goldman's execs don't like the restrictions on selling shares that came with the Oracle of Omaha's deal and they want to sell their stakes before the next downturn hits.  Always look at business deals through the prism of human greed and you'll understand everything about Wall Street. 

Uncle Sam's TARP managers can learn something here if they're paying attention.  This is how deals are done, and undone. 

Full disclosure:  No position in GS or BRK-A.