Following is the unofficial transcript of breaking news from CNBC’s Becky Quick on “Squawk on the Street” (9-11AM ET).
From http://www.cnbc.com video and text.
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CARL QUINTANILLA: WANT TO BRING IN BECKY QUICK, WHO KNOWS WARREN PRETTY WELL GOOD TO TALK TO YOU ON THE PHONE THIS MORNING.
BECKY QUICK: HEY CARL, HEY EVERYBODY. YEAH, I JUST GOT OFF THE PHONE WITH WARREN BUFFETT TALKING TO HIM A LITTLE BIT ABOUT THIS DEAL. NOW, WHAT’S INTERESTING ABOUT THIS, I GOT TO TURN DOWN THE TV A LITTLE BIT, WHAT’S INTERESTING ABOUT THIS IN BACKGROUND IS THAT BUFFETT SAYS JUST DREAMT THIS IDEA UP ON WEDNESDAY MORNING WHILE HE WAS THE BATHTUB. HE HAD NEVER SPOKEN WITH BRIAN MOYNIHAN BEFORE. IN FACT, HE DIDN’T EVEN HAVE HIS PHONE NUMBER. BUT AS THE PRESS RELEASE POINTS OUT, THIS IS SOMETHING AN OUTREACH THAT BUFFETT MADE TO BRIAN MOYNIHAN OF BANK OF AMERICA. HE HAD ONE OF HIS ASSISTANTS CALL MOYNIHAN’S ASSISTANT AND OFFERED HIS PRIVATE NUMBER UP. I GUESS THEY SPOKE AT SOME POINT MID-MORNING YESTERDAY AND MOYNIHAN WAS RECEPTIVE TO THIS WHOLE IDEA. WHAT’S AMAZING IS THIS WENT FROM BEING THOUGHT UP YESTERDAY MORNING TO ACTUALLY BEING INITIATED JUST 24 HOURS LATER. NOW BUFFETT SAYS HE THINKS IT’S A GOOD $5 BILLION INVESTMENT. I ASKED HIM WHY NOW AND HE SAID HE THINKS IT’S BETTER THAN ANYTHING ELSE THAT I CAN THINK OF AT THE TIME. HE ALSO SAID THAT IT’S VERY LIKELY THAT OVER TEN YEARS, THAT THEY DO EXERCISE AND OWN ALL OF THOSE WARRANTS, THAT THEY TURN THEM INTO SHARES. AT THAT POINT, IF SHARES OUTSTANDING EXISTS AS THEY DO TODAY, THEY’D OWN SIX AND A FRACTION OF PERCENT OF THE COMPANY. SO IT’S A MASSIVE INVESTMENT THAT HE’S THINKING OVER THE NEXT DECADE HE’D BE MAKING IN BANK OF AMERICA. I HEARD YOU ALL EARLIER POINT OUT THAT THIS IS SOMETHING HE’S DOING WHILE INVESTING IN WELLS FARGO. HE POINTED OUT HE THINKS WELLS AND BANK OF AMERICA HAVE TWO BEST DEPOSIT FRANCHISES IN THE UNITED STATES. HE DOES SAY THAT BANK OF AMERICA HAS SIGNIFICANT PROBLEMS IN THEIR PAST, BUT THEY’RE WORKING THEIR WAY THROUGH THEM. HE ADMITS THIS IS NOT SOMETHING THAT’S GOING TO BE RESOLVED IN A WEEK, MONTH, VERY LIKELY EVEN IN A YEAR, BUT THIS IS REMINISCENT OF SOME THINGS HE’S DONE IN THE PAST. YOU LOOK WHEN HE’S MADE MAJOR, MAJOR INVESTMENTS, IT WAS WHEN AMERICAN EXPRESS BACK IN THE 1960s. IT WAS WHEN AMERICAN EXPRESS HAD BIG PROBLEMS, TOO. IT WAS THE SALAD OIL SCANDAL.
QUINTANILLA: BECKY, LET ME JUST PAUSE FOR ONE SECOND AT THE OPENING BELL JUST QUICKLY TO LET PEOPLE KNOW KEMPER CORPORATION HERE AT THE BIG BOARD, AN INSURANCE HOLDING COMPANY CHANGES ITS NAME FROM UNITRIN AND OVER AT THE NASDAQ, CUPCAKE RETAILER, CRUMBS HOLDINGS AND THAT S&P REAL-TIME EXCHANGE BOARD LIGHTING UP TO THE GREEN LARGELY BECAUSE OF WHAT WARREN BUFFETT HAS DONE IN JUST THE PAST 15 MINUTES.
MELISSA LEE: WE SHOULD NOTE APPLE OPENING LOWER, BUT WE WANT TO GET BACK TO BECKY QUICK ON THE PHONE TO, SHE JUST TALKED TO WARREN BUFFETT. BECKY, I’M JUST CURIOUS, I MEAN OBVIOUSLY, HE SEEMS VERY CONFIDENT IN THIS INVESTMENT. IT’S A LARGE INVESTMENT, EVEN FOR WARREN BUFFETT, BUT ARE THERE ANY ISSUES? BUT WHERE THERE ANY ISSUES WHERE HE SAID YOU KNOW WHAT THESE ARE THE THINGS THAT I MIGHT BE A LITTLE CONCERNED ABOUT DOWN THE ROAD OR THESE ARE THE ISSUES THAT I WILL CONTINUE TO TALK TO BAC ABOUT DOWN THE ROAD.
QUICK: HE DID NOT, MELISSA. HE DID GET SPECIFIC WITH IT BUT HE DID SAY THAT OBVIOUSLY THEY HAVE SOME UNKNOWN LIABILITIES AND THAT’S A HUGE ISSUE. IT’S NOT SOMETHING TO BE TAKEN LIGHTLY. BUT I ASKED HIM WHY NOW AND HE SAID IT’S BECAUSE THE STOCK HAS COME DOWN SO MUCH RECENTLY, BANK OF AMERICA HAS GONE DOWN A LOT RECENTLY. AND HE SAYS HE THINKS BANK OF AMERICA IS CERTAIN TO BE AROUND OVER THE LONG-TERM. HE ALSO SAYS BY THE WAY, THAT THIS IS A VOTE OF CONFIDENCE. NOT ONLY IN BANK OF AMERICA, BUT ALSO IN THE COUNTRY. AND LISTEN TO THIS, HE SAYS ALL THOSE PEOPLE WHO THINK THE WORLD IS GOING TO END. I THINK THEY’RE WRONG.
QUINTANILLA: YEAH, I THINK IT IS INTERESTED BECK. I MEAN IT WOULD BE EASY TO MAKE THIS A BANKING OR B OF A STORY, BUT YOU LOOK AT THE TIMING OF THE WARRANTS AND YOU LOOK AT THEIR EXPOSURE TO THE CONSUMER OVER ALL AND IT IS SORT OF A MACRO BET MORE THAN A BANKING BET.,
QUICK: RIGHT AND THAT’S EXACTLY HIS POINT ON THIS CARL IS THAT HE LOOKS AROUND, IT DOES LOOK LIKE A LOT OF PEOPLE THINK THE SKY IS FALLING. HE SAYS THIS IS NOT 2008. THIS IS NOTHING LIKE WHAT WE SAW BACK THEN, WHICH INTERESTINGLY ENOUGH THIS MORNING ON “SQUAWK BOX” RON BARON SAID THE SAME THING. THIS IS NOT 2008. AND THAT’S IN FACT WHY HE SAYS BANK OF AMERICA GOT A BETTER DEAL THAN THE TERMS HE HAD LAID OUT FOR BOTH GENERAL ELECTRIC AND GOLDMAN SACHS THE LAST TIME HE DID DEALS LIKE THIS. DAVID FABER POINTED OUT THAT AT THAT POINT, THOSE PREFERRED SHARES WERE 10%. HE’S ONLY GETTING 6% ON PREFERRED. HE POINTS OUT THAT THAT IS A BETTER DEAL FOR BANK OF AMERICA AND THAT’S BECAUSE THIS IS NOT 2008. NOW HE DOES SAY THAT THE WARRANTS, HE GETS A BETTER DEAL ON THE WARRANTS THAN HE GOT UNDER THE DEALS WITH GOLDMAN SACHS AND GE. THE WARRANTS WITH GOLDMAN SACHS COULD HAVE BEEN CALLED AT ANY TIME. NOW GOLDMAN SACHS CALLED THE PREFERRED EARLIER THIS YEAR WHEN THE GOVERNMENT ALLOWED THEM TO DO THAT. GENERAL ELECTRIC, YOU HAD THREE YEARS THAT THEY WERE CALLABLE AND GE HAS SAID PUBLICLY THEY WILL CALL THOSE AS SOON AS THEY CAN. I THINK THAT’S MAYBE IN OCTOBER.
DAVID FABER: IT’S DAVID. YEAH, THAT IS RIGHT. THREE YEARS FROM OCTOBER 1st ’08 WHEN IT WAS A $3 BILLION INVESTMENT FROM BERKSHIRE AS YOU SAID INTO GE. NOW OF COURSE, THE WARRANTS HAD A STRIKE PRICE OF $22.25, SO HE’S NOT ANYWHERE IN THE MONEY THERE AND INTERESTINGLY NOT IN THE MONEY WITH THE GOLDMAN SACHS WARRANTS, WHICH HAD A STRIKE PRICE OF $115 A SHARE.
QUICK: RIGHT BUT DAVID, YOU POINTED OUT HE’S ALREADY HE’S IN THE MONEY WITH THESE BECAUSE OF THE HUGE MOVE WE’VE SEEN THIS MORNING IN BANK OF AMERICA.
FABER: RIGHT. YEAH. OBVIOUSLY, VERY INTERESTING TO WATCH. AND AGAIN, TO YOUR POINT, NOT ’08. I WOULD ALSO POINT OUT THERE’S PREFERRED SHARES OUT THERE THAT WERE YIELDING AS MUCH AS 10 OR 11 PERCENT EARLIER THIS WEEK SO AS WELL SO TO THE EXTENT THAT HE THINKS HE’S MONEY GOOD ON HIS PREFERRED YOU KNOW I’M SURE WE ARE SEEING A SIGNIFICANT RALLY IN THOSE SHARES AS WELL.
QUICK: JUST GOING ON REAL QUICKLY TO POINT OUT THAT THIS IS KIND OF LIKE SOME DEALS BUFFETT HAS DONE IN THE PAST SOME OF THE MAJOR DEALS HE’S IN HIS YOUTH. HE SAYS THIS IS LIKE GOING BACK TO HIS YOUTH WHERE NOT ONLY AMERICAN EXPRESS, WHERE HE GOT IN BACK IN THE 1960s, BUT THEN WITH GEICO BACK IN 1970. GEICO WAS IN TROUBLE, TOO. I BELIEVE BECAUSE OF SOME ACCOUNTING ISSUES. HE BOUGHT INTO THAT COMPANY, TOO AND BOUGHT A MAJOR STAKE AT THAT POINT, BUT IT’S THE IDEA OF BUYING INTO THE COMPANIES THAT LOOK LIKE THEY ARE IN TROUBLE, TAKING SOME MAJOR BETS AND BUYING BIG INTO THEM. THIS IS REMINISCENT OF SOME OF THE DEALS HE’S DONE IN THE PAST.
QUINTANILLA: JIM, YOU GOT A QUESTION?
JIM CRAMER: YEAH, ONE OF THE THINGS THAT I FEEL, AND I WANT TO GO TO DAVID ON THIS BECAUSE DAVID HAS COVERED THIS FAIRHOLME ISSUE. A LOT OF PEOPLE WERE SHOOTING AGAINST FAIRHOLME AND WE ALL KNOW IN THE BACK ROOMS, THE WAY THE HEDGE FUNDS WORK, IS LISTEN THERE ARE SHARKS CIRCLING JUST A HUMAN BEING THAT’S IN THE WATER THAT’S BLOODY AND DOESN’T THIS ALSO MEAN GOOD THINGS FOR AIG? PEOPLE WILL GO, PEOPLE HAVE BEEN SHOOTING AT FAIRHOLME WILL SUDDENLY SAY WAIT A SECOND, WHAT’S THE NEGATIVE STORY AIG? IT IS JUST THAT FAIRHOLME MUST HAVE REDEMPTIONS. THE REDEMPTIONS COULD STOP IT COULD CAUSE A TURN IN THE NE’ER-DO-WELL FINANCIALS.
FABER: JIM, IT’S A GOOD POINT AND AS YOU POINT OUT, ESPECIALLY IN FAIRHOLME, WHERE WE KNOW THERE ARE REDEMPTIONS, BECAUSE THERE’S MORE OR LESS INSTANT LIQUIDITY, NOT WITH PAULSON WHERE SO MANY OF HIS FUNDS ARE TIED UP FOR AT LEAST A HALF A YEAR IF NOT LONGER THAT IS A VERY STRONG POSSIBILITY. WOULD NOTE AIG SHARES ARE UP ALMOST 5% RIGHT NOW. YOU KNOW, PERHAPS BECAUSE AS YOU SAY, THIS WILL BE A REVERSAL FOR FAIRHOLME WHICH HAS HAD A VERY DIFFICULT YEAR GIVEN THAT VERY HEAVY CONCENTRATION IN FINANCIAL AND THEREFORE, THAT PATTERN TO THE EXTENT IT WAS OCCURRING, WILL STOP.
CRAMER: RIGHT. AND ALSO, THERE’S BEEN A TREMENDOUS UNDERWEIGHTING GOING ON BY ALL THE BIG MUTUAL FUNDS. NO ONE WANTS TO SHOW THAT THEY OWN ANY FINANCIALS. BECAUSE IT HAS BEEN THE KISS OF DEATH. SUDDENLY I THINK PEOPLE WILL SAY, LET ME PULL THE NUMBERS. BANK OF AMERICA IS SUPPOSED TO EARN 75 CENTS MAYBE THEY CAN DO A BUCK. –EIGHT TIMES EARNINGS. MAYBE THAT’S SOMETHING I WANT TO BE IN. THEN YOU START PUTTING MULTIPLES ON THE GROUP AGAIN, YOU REALIZE THAT A STOCK LIKE WELLS FARGO IS…CHEAP VERSUS ITS GROWTH RATE. THAT’S A DIFFICULT QUESTION FOR WELLS. BUT I DO THINK THAT THE HUGE SHORT TAKES HAS TAKEN A BREATHER AND YET PEOPLE ARE SO POORLY POSITIONED IN THIS GROUP, THEY ARE GOING TO LOOK AT IT FOR A COUPLE OF DAYS.
LEE: IT’S INTERESTING JIM TO SEE THE REACTION IN FINANCIALS TODAY. YOU LOOK AT A CITI UP BY ABOUT 11% AND IT SEEMS AT THIS POINT WITH WARREN BUFFETT STEPPING INTO BANK OF AMERICA THAT THERE IS A REALIZATION PERHAPS THAT SHARES ACROSS THE BOARD WITHIN THE SECTOR WERE BEING MISPRICED AND THERE’S AN AMOUNT OF CATCH-UP TO DO IN TODAY’S SESSION.
CRAMER: YOU LOOK AT THE FOUR OTHER DIVISIONS OF BANK OF AMERICA, THEY WERE DOING PRETTY WELL. IT WAS THE MORTGAGE PROBLEMS. WE HAVE TO BELIEVE THAT BUFFETT’S THE POSITION WITH WELLS FARGO ACTUALLY UNDERSTANDS THE DEPTH OF THE MORTGAGE PROBLEM. WHAT BECKY SAID OBVIOUSLY 24 HOUR MOVE. BUT IF YOU HAVE CONFIDENCE THAT THE MORTGAGE PROBLEM IS NOT AS DEEP AS THE BEARS THINK, THEN I THINK BANK OF AMERICA’S AN EASY CALL GIVEN THE FACT THE DEPOSIT BASE HAS BEEN VERY, VERY STEADY. AS WE KNOW FROM THE MARIA INTERVIEW WITH MOYNIHAN. THE REST OF THE BANK HAS A LOT OF MOMENTUM.
QUINTANILLA: OUR PRODUCER POINTS OUT THAT THE TOP 11 S&P 500 GAINERS RIGHT NOW ARE ALL FINANCIALS. THAT REALLY TELLS YOU WHERE THE DIRECTION IS COMING FROM. BECKY, I WAS JUST THINKING, WE GOT TO GET WARREN TO TAKE A BATH MORE OFTEN.
QUICK: YEAH, HE SAID, CARL, WHEN I TALKED TO HIM ABOUT THAT. I SAID HOW DO YOU COME UP WITH AN IDEA LIKE THAT IN THE BATHTUB. HE SAID WELL YOU COME UP WITH THE BIG IDEA JUST AS EASILY AS YOU CAN COME UP WITH A SMALL IDEA.
CRAMER: MAYBE HE WAS WATCHING “SQUAWK ON THE STREET.” YOU ALWAYS HAVE TO HOPE THAT KIND OF THING.
QUINTANILLA: I’M NOT SAYING HE’S DIRTY. BUT THIS IS AMAZING. IS THERE ANY CONCERN, JIM, THAT THEY ALMOST HAD TO DO A PRIVATE RAISE BECAUSE SOMEHOW, ONE WAY OR ANOTHER, ANY KIND OF PUBLIC CAPITAL RAISE WOULD HAVE BEEN DIFFICULT? MORE DIFFICULT THAN THIS?
CRAMER: WELL IF YOU LOOK AT WHAT THEY’VE BEEN SAYING OVER AND OVER AGAIN, WE DON’T NEED TO DO IT AND EVERYONE’S BEEN SKEPTICAL, EXCEPT FOR THE ONE GUY THAT HAD THE DOUGH TO BE ABLE TO DO IT SO I THINK THAT WHATEVER HAS BEEN THE, WHATEVER HAS BEEN THE BEAR CASE BEFORE, WHICH IS THAT WHEN WE GET THE BIG EQUITY OFFERING, OR WHEN MOYNIHAN IS TOSSED OUT AND THERE’S DISARRAY, THAT’S WHEN WE WILL COVER. NOW MOYNIHAN STAYS NO EQUITY OFFERING. I’M WATCHING SOME INTERESTING THINGS AND DAVID I WOULD LOVE TO HEAR YOUR COMMENT ON THIS. THE CFC PREFERRED, THIS IS A PIECE OF PAPER THAT A LOT OF PEOPLE THOUGHT MAYBE THEY HAVE CHAPTER 11. COUNTRY WIDE UP 12.25%. BANK OF AMERICA PREFFEREDS UP 10% RIGHT NOW, NOT AS MUCH AS THE STOCK, BUT YOU KNOW THIS COUNTRY WIDE ISSUE MAYBE WE CAN TAKE THAT OFF THE TABLE BECAUSE BUFFETT’S CLEARLY DONE THE HOMEWORK ON HOW BAD– I JUST DON’T BELIEVE HE SAID, I’M NOT WORRIED ABOUT COUNTRY WIDE. THERE HAD TO HAVE BEEN SOME CONSIDERABLE RESEARCH DONE ON THE BANKING GROUP WHEN IT COMES TO MORTGAGES JUST TO BE ABLE TO UP HIS WELLS FARGO STAKE.
QUICK: YOU’RE RIGHT IN TERMS OF WHAT HE SAID. THIS IDEA CAME TO HIM YESTERDAY, IN TERMS OF HOW TO STRUCTURE THE DEAL BUT HE POINTS OUT THAT HE FOLLOWS BANK OF AMERICA VERY CLOSELY, JUST LIKE HE FOLLOWS ALL THE BIG BANKS FROM WELLS FARGO TO JPMORGAN. HE HAS DONE THE RESEARCH HE HAS READ ALL OF THEIR FILINGS HE HAS FOLLOWED THE COMPANY AND HE KNOWS PRETTY WELL INSIDE OUT. HE KNOWS IT ALL THE WAY BACK FROM THE BIOGRAPHIES HE’S READ, FROM THE STORIES HE’S READ ABOUT THE BANKS BEGINNING, SO THIS IS NOT AN INVESTMENT HE MAKES LIGHTLY, NOT ONE THAT HE JUMPS IN AND DOES WITHOUT DOING HIS RESEARCH THE IDEA OF HOW TO STRUCTURE THE DEAL FOR ONE THAT WOULD BE ATTRACTIVE BOTH TO BANK OF AMERICA AND TO BERKSHIRE CAME TO HIM YESTERDAY, BUT YOU ARE ABSOLUTELY RIGHT THIS IS NOT SOMETHING HE DOES LIGHTLY AND HE KNOWS THE BANK INSIDE OUT.
