Bailout rejection a wrench for Buffett and Pandit

September 30, 2008 | By Jim Kim

Warren Buffett made it known that his $5 billion wager on Goldman Sachs assumed that the government would take some sort of bailout action. Likewise, Citigroup's deal for Wachovia would have looked a lot better if the bailout had been approved. Of course, the FDIC will assume some of the Wachovia portfolio risk. Still, Citigroup now adds about $122 billion more in option ARMs. All in all, the chances are good these stories will have happy endings. At some point, you have to think that the politicians will be able to agree on a plan. So relief is coming, one way or another. But there is still some uncertainty. A redrawn plan will likely be superior to the previous one--from a retail point of view. How favorable it will be to Buffett and Citigroup remains to be seen.

For more:
- here's a Financial Times item