At the depths of the financial crisis, Mr. Buffett bought $5-billion (U.S.) worth of preferred shares from Goldman, which come with a 10 per cent yield. At the time, the deal was heralded as a great move for Mr. Buffett because it gives him $500-million annual cheques - but Ms. Schroeder wonders why Goldman hasn't redeemed the shares now that its fortunes have reversed.
Her theory: Goldman's reputation is in tatters, and so it needs Mr. Buffett's good name. She explains:
"Buffett swapped his reputation at a cheap price. Goldman is holding him to the deal, hanging onto the preferred stock while Buffett's reputation is still useful. It is painful to watch Buffett behaving like a hostage to Wall Street, damaging himself by defending investment banks and saying flattering things about Goldman in a way that contradicts any principled view of the securities business."