Warren Buffett has vigorously defended Goldman Sachs against fraud allegations being levelled at the investment bank.
It is the first time the Sage of Omaha has spoken out since the SEC filed civil fraud charges against Goldman, which stands accused of deceiving investors ACA and IKB in a complex mortgage-backed derivative called Abacus 2007.
However, Buffett told 40,000 shareholders at the annual general meeting of his company Berkshire Hathaway that "there is no question the allegations alone" have hurt Goldman but they had not been proved, the Daily Telegraph reports.
Buffett has worked closely with the bank for 44 years and denied the charges would reflect on Goldman chairman Lloyd Blankfein.
Instead, Buffett hit out at ACA and said the bond insurer "drifted" into insuring synthetic debt structures which it did not understand. On RBS, whose ABN Amro arm insured ACA's part of the Abacus transaction and lost $841m, he said: "It's a little hard for me to get terribly sympathetic that a bank made a dumb credit deal."
Based on Berkshire's own activities in bond insurance, Mr Buffett said he would never assume to know what investors on another side of a particular trade he was involved in were thinking.
"When we [Berkshire] trade with them [Goldman], they could very well be shorting a product, they do not owe us a divulgence of their position more than any reason why we need to explain what we are doing with our position."
He said he "loves" Berkshire's stake in Goldman which pays an annual dividend of $500m or the equivalent of $15 a second.
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