Buffett Invests $5 Billion in Troubled BofA

August 26, 2011

Well-known investor Warren Buffett is investing $5 billion into Bank of America, which in recent months has been plagued by legal trouble over its foreclosure practices and has seen its stock values plunge. 

The bank giant services one in five mortgages. In just the last 18 months, the bank has suffered major losses of $9 billion, and is expected to face lots more. 

“In the shaky couple of weeks that we’ve gone through in the financial markets, it’s a good time for this vote of confidence by a savvy investor,” says Charles O. Holliday Jr., the bank’s chairman. “We didn’t need the capital, but it doesn’t hurt to have more in a volatile time.”

Buffett’s investment lifted the bank’s shares more than 9 percent Thursday. 

“This could be a momentum changer for us,” Holliday says. “But I’m not suggesting there’s a quick fix. There’s no magic wand.”

Bank of America acquired Countrywide Financial in 2008, inheriting subprime lending woes that have ever since left the bank tangled in investigations from state and federal officials and legal disputes over its foreclosure practices. 

Source: “Buffett to Invest $5 Billion in Shaky Bank of America,” The New York Times (Aug. 25, 2011) 

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