Wednesday, October 01, 2008
What Did Warren Do?
On Tuesday, Mr. Buffett says, he was sitting with his feet on his desk in Omaha, drinking a Cherry Coke and munching on mixed nuts, when he got an unusually candid call from a Goldman Sachs Group Inc. investment banker. Tell us what kind of investment you'd consider making in Goldman, the banker urged him, and the firm would try to hammer out a deal…
—The Wall Street Journal, September 25, 2008
Such was the Wall Street Journal’s folksy account of the Oracle of Omaha’s initial involvement in talks that led to a $5 billion investment in Goldman Sachs, the folksy details provided, of course, by the man himself.
The Oracle does like good press, when it suits him.
And so we here at NotMakingThisUp could not help but wonder about yesterday’s article in the same publication regarding a financial company Berkshire Hathaway has had an investment in for much longer than Goldman Sachs—nearly 18 years longer, by our math.
That company is Wells Fargo, which, according the Wall Street Journal was prepared to buy Wachovia Sunday afternoon, but backed out.
Here’s how the deal with Wachovia did not go down, according to that paper:
By Saturday morning, talks had heated up with various suitors, and Mr. Steel and his team flew to New York.
By the evening, Wells Fargo had begun to emerge as the favorite. It had told both Wachovia's advisers and regulators that it was prepared to do a deal without government assistance and was willing to pay a premium. Just as important, Wells Fargo representatives said they were confident they could complete a deal before the stock market opened Monday….
Midday Sunday, Mr. Kovacevich dropped a bombshell. Wells Fargo had developed concerns about the health of one of Wachovia's loan portfolios. Unless Wachovia could convince it otherwise, Wells Fargo wouldn't be willing to pay any more than $10 a share….
Now, "Mr. Kovacevich" is Dick Kovacevich, Chairman of Wells Fargo.
Warren Buffett himself has lauded Mr. Kovacevich as one of a handful of “giant-company managers whom I greatly admire,” ranking him alongside Jeff Immelt of GE and Ken Chenault of American Express.
Oh, and Berkshire Hathaway owns over 9% of Wells Fargo.
Given the long history, the large ownership stake, and the presence of Warren Buffett at the center of every financial crisis since Long Term Capital, we kept expecting Warren Buffett’s name, and Berkshire Hathaway’s ownership position, to come up in the Wall Street Journal account of Wells Fargo’s deal/no deal for Wachovia.
But they did not:
For the next four hours, Wachovia's team tried to ease his concerns, but Mr. Kovacevich kept repeating: "It's not my call, it's our loan people." Behind the scenes, Wachovia's advisers began to hear from regulators that Wells Fargo was getting cold feet.
Still, we wonder if somebody else besides anonymous “loan people” was gettting cold feet about Wells Fargo’s bid for Wachovia.
And, if so, we wonder why the same type of folksy details of that 'somebody else', like those provided in the Goldman Sachs story a few days back, never made yesterday's Wall Street Journal account of the deal/no deal for Wachovia?
I Am Not Making This Up
© 2008 NotMakingThisUp, LLC
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Posted by Jeff Matthews at 7:55 AM