Bank of Buffett

Comments on an NPR story on Warren Buffett's BoA investment.

(oldguy12) wrote:

1. In Feb 2011 Mr. Buffett reported that he liquidated his entire position in BoA sometime during the previous quarter, at an undisclosed loss.

2. Aug 10, 2011 BoA sells over 400,000 loans worth 73b to Fannie Mae for 500m, thereby removing these toxic assets off their books and onto the tax payers.

3. Aug 15, 2011 Mr. Buffett authors an op-ed in the NYTs recommending that the marginal tax rate on earned income be raised for millionaires...he does not recommend raising the tax rate on dividends, his primary source of income. Nor did he mention another huge tax advantage BH enjoys, the dividends received deduction.

4. Aug 19, 2011 BoA announces another round of layoffs bringing their 2011 US total to over 18,000. In 2010 BoA laid off over 17,000 US employees.

5. Aug 25, 2011 Mr. Buffett purchases 5b worth of BoA. The value of the annual dividends BoA will pay BH is projected to exceed 300m, which, when proportionately paid to Mr. Buffett, will be considered qualified dividends and taxed at 15%. But Buffett and BH enjoy another, even more valuable tax break, the dividend received deduction. Since BH owns part of BoA, they will reduce the dividend by 70% before recording it as income.

August 26, 2011 12:01:56 AM CDT

and....

(oldguy12) wrote:

1. BoA's issues began with their 4.1b acquisition of CountryWide Mortgage, which closed in Jul 2008. BoA announced plans to acquire CWM, the largest mortgagee in the US, in Aug 2007. In Mar 2008 media reported that the FBI opened an investigation into CWM's lending practices and alleged fraudulent accounting activities. Instead of walking away, which they could have done, BoA went forward with the purchase. This was during the height of the housing market\mortgage crisis and BoA received loan guarantees and regulatory waivers from the Feds as part of the deal. BoA paid 4.1B to obtain loans with a paper value of over 1T. The largest purchase of CWM loans prior to the acquisition - Fannie Mae.

2. BoA was essentially blackmailed by the Federal Reserve and Treasury into acquiring Merrill Lynch in Sep 2008 on the same day Lehman Brothers filed for Chapter 11...cost 50b. Not that it turned out bad for BoA since the former ML investment division has been profitable for BoA since early 2009.

3. In total BoA has received over half a trillion in tax payer subsidies since 2007, but don't fret, they've had to pay fines in excess of 500 million since 2008.

August 25, 2011 11:02:14 PM CDT