I'd love to buy a solid company with an approximately 17% (depending on how you calculate the value of the warrants) annualized return, in perpetuity.

I mean, yeah, Warren's confident they're not going bankrupt, so that's nice I guess--getting a junk-bond yield on a good franchise.

=====================

Exactly.

What would you do if you, and you alone, suddenly were able to buy Treasury Bills paying 10% when everyone else could only get 1.5%?

That's effectively what Berkshire just did.

The Fed decision to allow GS and MS to be reclassified provides explicit permission for them to partake of the Fed's sippy cup of cash which essentially means the government and Fed have deemed them too big to fail.

That means under virtually any larger meltdown scenario, they will be kept on enough government life support to never risk missing bond payments to...

...Berkshire.

And for being available with the right amount of cash at the right time, the prostrate bank had to offer up warrants to Berkshire which pose no downside to Berkshire but a huge upside if the firm somehow stages a recovery.

With deals structured like this, Berkshire carries none of the risk of any remaining junk in their trunk. I suspect WEB and CM would have no trouble letting the other banks go bankrupt and culling out the worthwhile assets out of bankruptcy rather than taking a pure equity position in overgrown banks buried in paper that hasn't been accurately valued for three years.


WTH