Goldman free of government but Buffett looms large

By Steve Eder - Analysis

NEW YORK (Reuters) - Now that Goldman Sachs Group Inc (GS.N) has settled its $10 billion debt with the U.S. taxpayer, investors are wondering about the Wall Street firm's other looming presence -- Warren Buffett.

Last September, shortly after Lehman Brothers Holdings Inc (LEHMQ.PK) went bankrupt, but before the U.S. Treasury unveiled plans to bail out the banking industry, Buffett's Berkshire Hathaway Inc (BRKa.N)(BRKb.N) invested $5 billion in Goldman and acquired preferred shares and warrants to buy common stock.

Goldman, which received $10 billion from the Treasury's Troubled Asset Relief Program, known as TARP, repaid that money on Wednesday. But Buffett's presence is large, not just because of his huge investment, but also given his reputation for integrity and as one of the world's savviest investors.

So what will Buffett, the second wealthiest man in the United States, according to Forbes magazine, do?

"Basically not much," said Vahan Janjigian, author of the book 'Even Buffett Isn't Perfect.'

"He has a history of making fairly large investments in these kinds of companies and sitting back and letting the management team run the company."

Janjigian expects Buffett to sit tight as Berkshire collects $500 million of annual dividends on the preferred shares and earns paper profits on accompanying warrants to buy $5 billion of common stock at $115 per share for up to five years.

Goldman closed on Thursday at $143.09, meaning Berkshire would earn more than $1 billion in profits if it cashed the common stock warrants now. That is in addition to the 10 percent preferred stock dividend, which is twice the 5 percent rate the government was getting from the TARP investment.