Buffett's Investment in Goldman Sachs

It's been a year since the market bottomed and the financial crisis presumably peaked.

There has been enough time for noted financial journalists such as Roger Lowenstein and Michael Lewis to write soon to be released books on the crisis.

As the general understanding of the events that took place continues to take shape, one has to wonder whether Warren Buffett's investment in Goldman Sachs will ultimately prove to be an irreversible stain on what is otherwise a brilliant career and reputation.

There is plenty of blame to go around, but Goldman Sachs is a consistently prominent actor in what has been a complete cesspool of activity.

Matt Taibbi's recent article in Rolling Stone is a must read for a somewhat strong view Goldman's role.

A recent interview with Michael Lewis in Bloomberg offers another perspective on the events and actors.

Why would Buffett have risked so much with the investment in Goldman Sachs? 

While the financial merits of the deal were compelling and provided his typical margin of safety, the reputational risk seems to be extraordinary.  To say the least, this seems odd coming from a person who has always been obsessed with maintaining the quality of his reputation. 

Was the famous "internal scorecard" that has guided Buffett throughout his life and career absent in the decision to invest in Goldman Sachs, or was the decision somehow an act of self-preservation?

At a minimum, the investment should be disappointing for those who have been admirers of Buffett's decisions and principles.


How and why would Buffett's investment in Goldman Sachs be an act of self preservation?

Self preservation in the sense that Goldman going the way of Lehman would have driven the financial markets and economy over a cliff. Nothing beneficial about that outcome for Buffett or Berkshire.

Sort of like JP Morgan stepping-up to "save" the financial system in the early 20th century--nothing really altruistic about that.