WRAPUP 1-Buffett strongly defends Goldman; Berkshire net up

* Buffett defends $5 billion Goldman investment

* Would vote for Blankfein twin if new Goldman CEO needed

* Berkshire swings to Q1 profit, operating net up 30 pct

By Svea Herbst-Bayliss and Jonathan Stempel

OMAHA, Neb., May 1 (BestGrowthStock) – Warren Buffett on Saturday
launched a strong defense of Berkshire Hathaway Inc’s (BRKa.N: )
(BRKb.N: ) $5 billion investment in Goldman Sachs Group Inc
(GS.N: ) and the investment bank’s embattled chief executive,
Lloyd Blankfein.

Speaking at Berkshire’s annual meeting, Buffett also said
Berkshire swung to a $3.63 billion first-quarter profit (Read more your timing to make a profit.),
compared with a year-earlier $1.53 billion loss, helped by an
improving economy and gains from investments and derivatives.

Buffett said operating earnings rose 30 percent from a year
earlier to $2.22 billion from $1.71 billion, helped by “a
pretty good uptick” in activity among Berkshire’s roughly 80
operating units.

Berkshire’s investment in Goldman preferred shares in
September 2008 has become controversial for Buffett, given his
long-standing emphasis on good corporate ethics and criticism
of Wall Street excess.

Buffett said he did not hold against Goldman the U.S.
Securities and Exchange Commission civil fraud lawsuit alleging
the bank hid from investors that securities underlying a risky
debt transaction were chosen by Paulson & Co, a hedge fund firm
that was betting they would lose value.

Goldman has called the charges unfounded, and Paulson was
not charged.

News that investigators opened a criminal probe into
Goldman has led to increased speculation about Blankfein’s job
security, but Buffett expressed strong support.

Asked who should run Goldman if Blankfein were replaced,
Buffett said: “If Lloyd had a twin brother, I would vote for
him. I have never given that a thought.”

The $5 billion investment consists of preferred shares that
throw off $500 million in annual dividends, plus warrants to
buy an equal amount of common stock. Goldman can buy back, or
“call,” the preferreds at a premium.

GOLDMAN, DERIVATIVES

“We love the investment,” Buffett said. “Our preferreds are
paying $15 a second, so as we sit here, ‘Tick, tick, tick,
tick,’ that’s $15 every second,” he said.

Buffett added that the SEC lawsuit was not a serious enough
event to raise reputational issues that would call into
question the Berkshire investment.

Asked whether Goldman should have disclosed it had received
a “Wells notice” from the SEC indicating possible civil
charges, Buffett said such notices are not necessarily material
to larger companies such that disclosure is needed.

“If it leads to something more serious, then we will look
at the situation at that time,” he said.

Buffett and Berkshire Vice Chairman Charlie Munger also
discussed the potential overhaul of financial regulation now
being weighed in Congress.

Munger argued the system should be changed to be “less
permissive” to banks. “What we need is a new version of
Glass-Steagall,” he said, referring to a Great Depression-era
law that kept commercial and investment banks separate. It was
repealed in 1999.

Berkshire has opposed a provision in proposed legislation
that could force it to post more collateral on its roughly 250
derivatives contracts, mainly tied to longer-term performance
of stock price indexes.

But Buffett said Berkshire would likely “not have to put up
a dime” because the company is unlikely to be regarded as so
“dangerous to the system” as to require such collateral.

Investments and derivatives generated $1.41 billion of
Berkshire’s preliminary first-quarter profit (Read more your timing to make a profit.), compared with a
year-earlier $3.24 billion loss.

Insurance profit fell just 3 percent, while profit in
regulated businesses such as utilities and newly acquired
Burlington Northern Santa Fe Corp, as well as manufacturing,
service & retailing businesses, roughly doubled.

Final results are expected May 7.

2:58 A.M.

Attendance at the meeting is believed to have reached a
record 40,000, with only about half of attendees able to fit in
the main arena at Qwest Center Omaha. Hundreds lined up to
enter prior to its 7 a.m. opening.

“I was first in line at this door at 2:58 a.m.,” said Bill
Guenther, 57, a forester from Newfane, Vermont, who said he
owns 50 Berkshire Class B shares and was at his first meeting.

“I’ve always been a fan of Warren Buffett,” he said. “I’m
an old-school sort, I’m not a dot-commer, I’m not a techie, I
don’t even have a TV at home. But I’ve always admired Warren.
He was called a dinosaur during the big dot-com bust, and when
all that collapsed, we saw he was doing it the right way.”

Before the meeting, Buffett ambled around a nearby exhibit
hall featuring Berkshire companies, spending 10 minutes
marveling at a model railroad at the Burlington Northern
exhibit, and strumming a ukulele as he belted out “I’ve Been
Working On The Railroad” with The Quebe Sisters Band.

He later picked up his usual vanilla and orange bar at a
Dairy Queen stand, but did not pay the $1 he usually does.

“We got his donation earlier,” the vendor said.

Buffett, 79, is worth $47 billion, Forbes magazine said in
March.

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WRAPUP 1-Buffett strongly defends Goldman; Berkshire net up