I’m seeing some confusion out in Twitterland about Buffett’s loan to Goldman Sachs last September. Buffett got $5 billion of perpetual preferred stock with a 10 percent dividend and warrants to buy $5 billion of common stock at $115 a share at any time in the next five years. Goldman could repurchase the preferred stock at any time at a 10 percent premium, making it less than “perpetual.”

Sure, the common stock collapsed to $50 after the deal, but it didn’t matter. Buffett had locked in a 10% dividend on the preferred and the warrants on the common, which are good for five years, were “free.” Could he have struck an even harder bargain if he had waited a couple more months? Maybe, but that’s hindsight… at the time he loaned his money (and prestige), he got a great deal. (Details in the 8-K)

Related: The Merchant of Omaha, September 25, 2008