Buffett 'has no plans' to sell stake in Goldman

Berkshire Hathaway chief executive Warren Buffett says he has no plans to sell his company's stake in Goldman Sachs Group as the investment bank fights civil fraud charges.

Buffett and Charlie Munger, Berkshire's vice-chairman, both praised Goldman on Saturday as Berkshire held its annual meeting.

Both executives said they were happy with Goldman CEO Lloyd Blankfein's leadership. And they did not view the Securities and Exchange Commission's charges against Goldman as a reflection on Blankfein.

Buffett also previewed his company's first-quarter earnings report at the meeting. Berkshire rebounded from last year's first-quarter loss and earned US$3.6 billion ($4.95 billion) as the economic recovery began and Berkshire absorbed Burlington Northern Santa Fe railroad.

The full report will be released this week. In the first quarter of last year, Berkshire lost US$1.5 billion.

The addition of Burlington Northern more than doubled Berkshire's regulated businesses unit income to US$555 million in the January-March period. The unit also includes utilities.

Buffett said Berkshire's results showed the economy was improving because manufacturing and retail income grew 85 per cent to US$477 million.

Last year's loss included US$241 million on the sale of investments. Berkshire also took a US$1.9 billion charge from writing down a ConocoPhillips investment.

Buffett has been one of Goldman's biggest supporters before and after the SEC filed its civil lawsuit against the bank on April 16. It charged the investment bank with misleading investors about a deal involving complex mortgage-related investments that later plunged in value.

During an expected five hours of questions from shareholders, Munger noted that the SEC vote to file the charges was three to two. He said that had he been a member of the SEC, he would have voted against the suit.

On Friday, Goldman stock plunged 9 per cent on reports that the Justice Department had opened a criminal investigation of Goldman.

Buffett told shareholders that Berkshire's US$5 billion of preferred stock in Goldman was a good investment because it generated 10 per cent interest a year. The investment included warrants that could convert the preferred shares into regular stock at US$115 a share, a discount from Goldman's current price of US$145.20.

Buffett and Munger also discussed the financial overhaul legislation that is now before Congress. Munger said the regulatory system should be changed to be much less permissive for investment banks.

Berkshire has objected to one provision of the financial overhaul that could require companies to post collateral on existing derivative contracts.

Derivatives are complex investments that have been blamed in part for the 2008 financial crisis and the recession. Banks lost billions of dollars on derivatives, and that and the recession led the Government to bail out hundreds of banks and insurance companies.

But Buffett said he didn't believe the bill, as it was written now, would require Berkshire to post any additional collateral on its 250 derivatives, because the company was unlikely to pose a threat to the system.

- AP