Warren Buffett’s bank deal pays off

You have to hand it to Warren Buffett (pictured) - he knows how to make money even in the middle of a financial crisis he himself has called America's "economic Pearl Harbour". Within hours of announcing his $5bn stake in Goldman Sachs on Wednesday, the great investor - or the 'Sage of Omaha' as he doesn't mind being called - had already made a $783m notional profit after shares in the bank rose by six per cent.

It turns out, according to the Wall Street Journal, that Buffett had been approached by countless Wall Street institutions seeking his help as the credit crisis deepened over recent months. He finally decided to put his money in Goldman Sachs when, "sitting with his feet on his desk in Omaha, drinking a Cherry Coke and munching on mixed nuts", he received a phone call from one of the few bankers in whom he trusts, Byron Trott, head of the Goldman Sachs Chicago office.

Despite a bad experience in banking with Salomon Brothers in the 1990s, as reported on The First Post on Wednesday, Buffett was persuaded by Trott to invest in Goldman's. Trott, 49, knew he had a better chance than most of persuading Buffett to part with his money. Earlier this year, Buffett had said: "Byron is the rare investment banker who puts himself in his client's shoes ... I trust him completely."

As a young investment banker at Goldman's, Trott used to work under Hank Paulson, then the managing partner of the Chicago office, now the Treasury Secretary trying to push his $700bn government bail-out package for the financial sector through a reluctant Congress.

Buffett is a big supporter of Paulson's plan - he even predicts that the taxpayer could make a profit on the proposed federal investment in toxic mortgage debt. "If I had $700 bn on the government's terms to buy distressed assets, I would," he said, adding modestly: "Unfortunately, I'm tapped out."