Warren Buffett's BofA investment: A 'bad omen'?

The legendary businessman has pumped $5 billion into the struggling banking giant, triggering fears of another Wall Street bailout

Warren Buffet's recent $5 billion investment in Bank of America leading some analysts to think the nation's largest bank is about to fall.
(Image credit: Mario Tama/Getty Images)

Warren Buffett has made his name, and his fortune, by profitably investing in troubled companies. In 2008, at the height of the financial crisis, he invested $5 billion in Goldman Sachs, a deal that reaped him $10 billion in dividends, interest, and fees just months later when the government bailed out Goldman. Now, in a déjà vu move, Buffett has pumped $5 billion into Bank of America — cutting a deal that's quite "favorable" to him — as the nation's largest bank struggles with lawsuits and repurchasing faulty mortgages. Is Buffett's big buy a "bad omen" for BofA and the U.S. economy?

This is a bad, bad sign: "This investment tells us that this economy is really in trouble," says Nicholas Santiago at InTheMoneyStocks.com. Just a few days ago, Bank of America insisted that it didn't have any capital problems, but now we know the truth: This is 2008 all over again. Buffett's investment proves that today's financial crisis isn't confined to Europe — "leading banks in the United States are in serious trouble as well." And it might not be just BofA. "If there is one cockroach there is usually a million."

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