First Goldman Sachs, now General Electric. Billionaire
Trading of
Berkshire will also receive warrants, with a five-year term, to purchase $3.0 billion of common stock at $22.25 a share, a 9.6% discount with GE down 90 cents, or 3.5%, at $24.60, after trading resumed Wednesday afternoon. The deal mirrors Berkshire's Sept. 23 investment of $5.0 billion in Goldman Sachs
Buffett said he made the Goldman deal with the expectation that some type of bailout package would be passed through Congress. With the bill defeated in the House Monday, and the Senate planning a Wednesday night vote on its own bill, Buffett said in a televised interview that he would be willing to take a stake in the Treasury Department's $700.0 billion package. The billionaire told CNBC he would take 1.0% of the deal if the government plans to buy mortgage-related securities from banks at market prices, a situation he predicted will lead to profits. (See "Lawmakers Seek Solution To Bailout Mess.")
The investment into GE took the spotlight away from the Senate, which is meeting in Washington with hopes to pass a rescue package during a vote later Wednesday night. Fears that the frozen credit markets will bring the entire U.S. economy to its knees continue to be the most popular argument in support of the bailout, and lending rates between banks illustrate the conditions. The overnight London interbank offered rate was below Tuesday's levels at 3.79%, but that was more a reflection of the prior day's spike to 6.88% as banks declined to take on any nonessential risk on the final day of a quarter. Three-month Libor was up to 4.15%, from 4.05% Tuesday.
Concerns remain that if credit remains tight the commercial paper market may continue to dry up, and traders were looking toward the Federal Reserve's weekly data which last showed the market shrunk by $113.0 billion in the two weeks up to Sept. 24. There is also a chance the potential crisis in the market for commercial paper, which are basically short-term IOUs companies use to fund daily operations like payroll, may be overstated to some extent. GE Chief Executive
Wall Street had shed most of its losses by the afternoon, holding mildly negative as investors looked ahead to the Senate's bailout vote. The Dow was down 9 points, or 0.1%, to 10,841; the S&P 500 lost 4 points, or 0.4%, to 1,162; and the Nasdaq was off 17 points, or 0.8%, to 2,074.
Automakers reported September's domestic sales figures Wednesday, and the numbers were not pretty for at least one Detroit company.