Goldman receives boost from Buffett

Billionaire investor Warren Buffett has given Goldman Sachs a boost with a $5 billion investment.

Mr Buffett's firm Berkshire Hathaway is buying $5 billion of perpetual preferred stock with a ten per cent dividend. Berkshire will also receive warrants to buy $5 billion of common stock at $115 a share at any time in the next five years.

Shares in the Wall Street giant shot up on the news, as did shares in Morgan Stanley.

Both investment banks have recently applied to change their status to bank holding companies in order to survive the financial crisis that has claimed rivals Merrill Lynch, Bear Stearns and Lehman Brothers.

Warren Buffett is famed for his astute investing decisions, which have made him the world's richest man, according to Forbes.

His acquisitions, through his company Berkshire Hathaway, are closely watched by investors and this latest purchase is being seen as a ringing endorsement for the bank.

It could also give a lift to other financial stocks, if investors see the move as a sign that the 'Oracle of Omaha' thinks the sector has finally hit rock bottom.

However, investors are still nervous about financial stocks as the US Congress debates White House plans to buy $700 billion worth of mortgage-backed securities – described by George Bush as "toxic".

Yesterday, Senator Jim Bunning of Kentucky stated the proposed deal was "not the solution".

"It is financial socialism and it is un-American," he said.