Struggling Bank of America is getting a $5 billion shot in the arm from the Oracle of Omaha.
Billionaire Warren Buffett plans to invest in Bank of America by buying 50,000 shares of cumulative perpetual preferred stock with a 6 percent annual dividend, the bank said on Thursday.
The deal proved again that Buffett has become something of a lender of last resort to the financial system, as he did with Goldman Sachs in the 2008 financial crisis. Buffett's role in aiding the economy and the financial system has become symbolically important given the lack of policy options left for the U.S. government and the Federal Reserve to stimulate demand.
"This proves to the market that if the bank needs additional capital, which we don't believe they do, but if they needed to calm the market by raising capital, they could do it within 30 minutes with a quick call to Uncle Warren," said Sean Egan, managing principal of Egan-Jones Ratings.
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