Stephen Foley: Mr Buffett's bathtime would have been long
Stephen Foley is a former Associate Business Editor of The Independent, based in New York. He left in August 2012. In a decade at the paper, he covered personal finance, the UK stock market and the pharmaceuticals industry, and had also been the Business section's share tipster. Between arriving with three suitcases in Manhattan in January 2006 and his departure, he witnessed and reported on a great economic boom turning spectacularly to bust. In March 2009, he was named Business and Finance Journalist of the Year at the British Press Awards.
Saturday 27 August 2011
US Outlook: For a man who says his company doesn't need to raise cash, Bank of America's Brian Moynihan has sure raised a lot of cash this week.
It was reported last night that the bank is close to selling some or all of its $20bn holding in China Construction Bank, a deal that would come on the heels of a $5bn investment from Warren Buffett, the Yoda of investment wisdom and America's buyer of last resort.
Mr Buffett claimed that the idea of investing in Bank of America came to him on Wednesday morning while he was having a bath – a notion that is as preposterous as it is in keeping with his folksy image. As a long-time bank stock investor, Mr Buffett will have been analysing BofA for much longer than the duration of his bathtime.
Mr Moynihan, too, has seen stock market volatility take his bank to within a hair-trigger of a loss of confidence that could be its undoing. Fitch Ratings calculated that, before the Buffett investment, BofA would take six years to generate the necessary capital to comply with new international regulations, compared with less than two for its nearest rivals. Mr Moynihan wasn't telling true when he described the capital raise as a nice-to-have rather than a must-have.
It's been a good week for spin.
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