OMAHA, Nebraska (Reuters) - Warren Buffett on Sunday stood by his feisty defense of a controversial mortgage transaction marketed by Goldman Sachs Group Inc, saying the investment bank’s behavior did not warrant public opprobrium.
“I don’t have a problem with the Abacus transaction at all, and I think I understand it better than most,” Buffett said at a press conference. He added that he saw nothing in Goldman’s behavior to justify more criticism than Wall Street gets generally.
Berkshire Hathaway Inc, Buffett’s insurance and investment company, owns $5 billion of preferred shares that throw off a 10 percent annual dividend.
Buffett said at Berkshire’s annual meeting on Saturday that he still loved the investment, and offered forceful support for Goldman Chief Executive Lloyd Blankfein.
The defense has made Buffett perhaps Goldman’s most powerful defender following the U.S. Securities and Exchange Commission’s civil fraud lawsuit on April 16 against the company.
That lawsuit alleged that Goldman hid from investors that securities underlying Abacus were chosen by Paulson & Co, a hedge fund firm that was betting they would lose value. Goldman has rejected the allegations, and Paulson was not charged.
“It’s very strange to say, at the end of the transaction, that if the other guy is smarter than you, that you have been defrauded,” Buffett said. “It seems to me that that’s what they are saying.”
Buffett also said he had no reason to believe that Goldman misled ACA, which helped create the transaction, about Paulson’s involvement — and that it should not matter to ACA.
“Any bond insurer that is making a decision about what to insure and what to charge for it should not care a whit about who is on the other side of the transaction,” he said. Buffett said “you’ll never hear us claiming that,” if Berkshire has to pay off on some municipal bonds it insures.
Goldman’s experience, though, could result in greater scrutiny of its internal processes.
Buffett recalled his experience taking over Salomon Inc as interim chairman in 1991 to clean up internally after a Treasury auction scandal.
He said his big fear at the time was that a thorough scrubbing of internal processes could result in “something coming up that I didn’t know about.”
Reporting by Svea Herbst-Bayliss and Jonathan Stempel; editing by Martin Golan