🏦 Goldman Sachs

In addition, we own positions in non-traded securities of Dow Chemical, General Electric, Goldman Sachs, Swiss Re and Wrigley with an aggregate cost of $21.1 billion and a carrying value of $26.0 billion. We purchased these five positions in the last 18 months. Setting aside the significant equity potential they provide us, these holdings deliver us an aggregate of $2.1 billion annually in dividends and interest. Finally, we owned 76,777,029 shares (22.5%) of BNSF at yearend, which we then carried at $85.78 per share, but which have subsequently been melded into our purchase of the entire company.

And of course, you see that dramatically, in the case of some companies that have a government guarantee for part of their money and then sell other money — and then sell other bonds — that aren’t guaranteed. I mean, just the other day, as I remember, I may be wrong on this, but I think Goldman Sachs sold something with a 400 basis point spread that wasn’t guaranteed. Whereas their guaranteed paper would be hundreds of basis points underneath that. General Electric sold something earlier this year that wasn’t guaranteed. And the spread between the guaranteed and the un-guaranteed was huge. We don’t have anything guaranteed to sell, so we are not in that favored class in any way. And we can’t become a bank holding company. So as long as the situation goes on, we have to figure out ways that we adjust. We only really use borrowed money — we use it in our utility business. But other utilities are not in this favored class. I mean, the utility industry generally. So our utility borrows money quite well, compared to most utilities. MidAmerican’s credit is regarded as very good. ANDREW ROSS SORKIN: Well, this question came in this morning. And it’s a timely, philosophical one, given the results of the stress test that will coming out next week. And it relates to your stakes in Wells, U.S. Bancorp and Goldman Sachs. And the question is the following: “The government’s proposed restructuring plans for Chrysler and GM require creditors, as well as common shareholders, to bear losses. “Yet, with the banks, the government’s actions, to date, have not required concessions from holders of preferred stock and debt. The government has merely required the dilution of common stock holders. “To what extent should holders of preferred stock and debt share losses in the bank rescue plans or in the resolution of a major bank holding company? And do you expect to be diluted in any of your holdings?”

CAROL LOOMIS: However, Warren and Charlie may be smart enough to have guessed that the first question will be about topic A, which is Goldman Sachs. And I received several emails about the SEC’s lawsuit against Goldman, all of them asking a different question about that problem. I have combined the several thoughts in these questions, and with thanks to Greg Firman (PH), Kai Pan (PH) of Morgan Stanley, Brian Chan (PH), and Vic Timono (PH), here is the question: Warren, every year in the Berkshire movie, you did it again today, you use the clip from the Salomon crisis in which you tell Congress that you have warned Salomon’s employees that if they lose a shred of the firm’s reputation, you will be ruthless in your reaction. Clearly, Goldman Sachs has lost reputation because of the SEC’s action. Could you tell us your reaction to the lawsuit, your reflections in light of it about Berkshire’s large investment in Goldman? And what advice, in light of your own Salomon experience, you would give Goldman’s board of directors and management? My guess is the bond insurer employed more people than John Paulson did in his business, and they just made — they made what turned out, in retrospect, to be a dumb insurance decision. And for the life of me, I don’t see whether it makes any difference whether it was John Paulson on the other side of the deal, or whether it was Goldman Sachs on the other side of the deal, or whether it was Berkshire Hathaway on the other side of the deal. Let’s say we had decided to short the housing market in some way in early 2007. I don’t think anybody should blame us for taking our position if we did it. We didn’t do it. Or if we’d taken the long side. I think before we get to the other part of Carol’s questions, I’d ask Charlie to comment as this as Charlie has a law degree, and in other ways is superior to me, so we’ll get his views.