Well, that’s a vote of confidence for ya.
 
Warren Buffett, the Omaha Oracle who chose not to pony up his Berkshire Hathaway billions to save A.I.G., is pumping $5 billion into Goldman Sachs, beefing up the balance sheet of one of Wall Street’s two remaining major independent investment banks.
 
Buffett’s holding company is buying $5 billion worth of Goldman’s perpetual preferred stock, part of a $7.5 billion capital-raising move by the firm. The other $2.5 billion will come from a public offering of common shares, the firm said.

The Wall Street Journal reported Berkshire also will get warrants granting it the right to buy $5 billion of Goldman common stock at $115 a share, which is 8 percent below the 4 p.m. closing share price Tuesday of $125.05. At Goldman's roughly $50 billion market value, based on that closing price, exercising those warrants would give Berkshire about a 10 percent stake in Goldman. The $2.5 billion offering, if successful, will dilute that amount to about 7 percent of the company, the paper said.
 
The historic investment aligns the man many consider to be the world’s savviest investor—who saved Salomon Brothers in 1987 and took control of it in 1991—with the firm widely regarded as the best on Wall Street. And as a shaken U.S. economy grasps for stability, it may turn out to have a major impact on the market and the pace of the Bush Administration's bailout plan.
 
Goldman, which along with Morgan Stanley moved to become a bank holding company this week to secure its financing from the federal government, hadn’t needed to raise capital since the crisis on Wall Street began.
 
That capital crunch claimed storied franchises Bear Stearns and Lehman Brothers, had Merrill Lynch on the precipice before Bank of America acquired it, and send Morgan Stanley looking overseas to sell a 20 percent stake to Japanese giant Mitsubishi UFJ Financial Group for $8.4 billion.

On Capitol Hill, after a day of tense hearings on the government’s $700 billion bailout, the hopes were that Buffett’s move would start to change the psychology of the market. In one spasm of optimism, Sen. Charles Schumer (D-NY) called the Berkshire investment "a vote of confidence not only in Goldman but in Washington's commitment to come up with a plan."

And as it made Washington happy, Buffett's Goldman play also sparked optimism in the financial sector. Goldman shares, which have lost more than 40 percent of their value in 2008, climbed as much $9.70, or 7.7 percent, to $134.75 in after-hours trading Tuesday night.

It’s a bold move for Goldman chief Lloyd Blankfein, who seems to have found solid ground for his firm (and its trillion-dollar balance sheet) while also bringing in a legendary investor with strong feelings on the economy and financial climate.
 
This isn’t the first time Buffett has emerged during a major financial crisis. He injected $700 million into Solly in 1987, before the market's historic October crash. In 1991, he rode to its rescue again, this time assuming control of the firm after it got nailed by regulators for making illegal bids in Treasury bond auctions.

Buffett eventually divested totally in 2001, about four years after Salomon was acquired by Sandy Weill’s Travelers, which later merged with Citigroup to launch the era of the megabank.