169-Buffett to invest $5bn in Bank of America

Warren Buffett’s Berkshire Hathaway has agreed to invest $5bn to shore up confidence in Bank of America, in a deal that underscores the billionaire investor’s singular role in stabilising US financial institutions in times of crisis.

BofA’s shares have tumbled almost 40 per cent this year amid concerns the bank’s troubled mortgage business could overwhelm its balance sheet, forcing the lender’s executives to reverse course and raise additional equity.
The stock surged on the news on Thursday, and by mid-morning in New York was up 12 per cent at $7.82 with other banks also trading higher.
BofA will sell Berkshire 50,000 preferred shares valued at $100,000 each. The shares pay an annual rate of 6 per cent. That is less than the 10 per cent Mr Buffett negotiated from Goldman Sachs and General Electric in similar investments he made at the height of the financial crisis but is still almost 4 percentage points above the yield on 10-year government debt............



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