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Buffett Stands to Profit Handsomely From Mortgage Abuse Settlement

It appears that billionaire Warren Buffett will again profit from a major decision made by the White House.

“Warren Buffett’s stake in Bank of America Corp. increased in value by $154 million after President Obama and the U.S. Justice Department announced a $25 billion foreclosure abuse settlement with the five largest U.S. banks Thursday,” Patrick Howley of The Washington Free Beacon writes.

How did Buffet manage that?

Well, as it turns out, the man who has both publicly and repeatedly begged to have his taxes raised invested $5 billion in Bank of America (BofA) on Aug. 25, 2011.

“As part of his investment deal, Buffett gained warrants that allow him to buy 700 million shares of Bank of America stock at a strike price of $7.14 a share,” Howley writes.

However, on Dec. 19, 2011, it was reported that Buffett was $1.5 billion in the hole on his stock warrant because shares of BofA were trading at $4.94. But all that changed when President Obama announced the details of the $25 billion dollar settlement. After the White House explained the settlement Thursday morning, BofA stock closed at $8.13 a share.

The stock opened Friday morning at $8.31 and reached as high as $8.35 a share.

“If Buffett had exercised his warrants Friday morning, he would have made $847 million. $154 million of that profit would have been related to the foreclosure deal,” Howley reports.

And as mentioned in the above, this isn’t the first time a decision by the White House has paid off for the Berkshire Hathaway CEO.

Recall that in November 2011, it was reported that President Obama’s two-year postponement of the deadline to determine the future of the proposed Keystone XL pipeline would “force North Dakota oil producers to rely more heavily on the Burlington Northern Santa Fe Railroad.”

Warren Buffett’s Burlington Northern Santa Fe LLC is among U.S. and Canadian railroads that stand to benefit from the Obama administration’s decision to reject TransCanada Corp.’s Keystone XL oil pipeline permit,” Bloomberg reported earlier this year.

Buffett’s Berkshire Hathaway Inc. holding company purchased the Burlington Northern Santa Fe Railroad Corp. in a total package worth $44 billion in 2009.

“Whatever people bring to us, we’re ready to haul,” Krista York-Wooley, a spokeswoman for Burlington Northern, a unit of Buffett’s Omaha, Nebraska-based Berkshire Hathaway Inc., said.

If Keystone XL “doesn’t happen, we’re here to haul.”

And let's not forget that, as mentioned earlier on The Blaze, the billionaire philanthropist and market speculator has also been accused of using an “informational advantage” to make bets and investments on the market.

The man who once said, “Through the tax code, there has been class warfare waged, and my class has won,” might have been investing in the markets with information that only he and a handful of politicians had been given access to.

Ordinarily, this is called "insider trading" and it's extremely illegal. Well, it is unless you're a member of Congress -- or perhaps extremely cozy with high ranking members of the administration.

Now, to be fair, perhaps Buffett’s good fortune at the hands of the mortgage abuse settlement is the result of keen investments and good luck. But then again, this is the second time in less than a month that he stands to make an impressive amount of cash because of something the White House did.

One last thing…
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