On September 23, 2008 – two days after Goldman Sachs became abank holding company– the firm announced a private offering to Berkshire Hathaway whereby Berkshire Hathaway would purchase US$5 billion in special preferred shares that would pay a 10 percent annual dividend. The firm had the option of buying back the shares for US$5 billion plus a one-time dividend of US$500 million. Buffett stipulated that Goldman Sachs’ top executives pledge not to sell their own shares before Buffett sold his. Berkshire Hathaway would also acquire warrants to buy an additional US$5 billion of common stock at US$115 per share.
The day after the announcement, Goldman Sachs completed a public offering of 46.7 million shares of common stock at US$123 per share for proceeds of US$5.75 billion in an offering that was well-received and oversubscribed.
Just a few weeks later, on October 27, the firm received an injection of an additional US$10 billion under the Capital Purchase Program (CPP) funded by the US Treasury’s Troubled Asset Relief Program (TARP). Lloyd Blankfein, the firm’s chairman and CEO, noted that while the firm had neither sought nor expected such an infusion of capital from the Treasury, it appreciated its value in light of market conditions. “We view the TARP as important to the overall stability of the financial system and, therefore, important to Goldman Sachs,” said Blankfein in testimony to the US Congress. He followed,
