Warren Buffett has robustly defended Goldman Sachs against the fraud allegations that threaten to engulf the Wall Street giant.

In Warren Buffet's eyes, Lloyd Blankfein really is "Doing God's work".

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/766...

The "Sage of Omaha" – speaking publicly for the first time since the Securities and Exchange Commission (SEC) filed civil fraud charges against the investment bank – stressed that he "loves" his $5bn
(£3.27bn) stake in the investment bank and branded the Royal Bank of
Scotland as "dumb" for losing $900m on the $1bn transaction under
scrutiny from civil and criminal investigators.

Speaking at Berkshire Hathaway's annual meeting in Omaha, Nebraska, Mr Buffett told 40,000 shareholders present that "there is no question that the
allegations alone" have hurt Goldman, but stressed that the allegations
had not been proven.

The SEC alleges that Goldman deceived investors ACA and IKB in a in a complex mortgage-backed derivative - called Abacus 2007 - in favour of the hedge
fund Paulson & Co, which made a $1bn profit from the transaction. The US
Department of Justice has launched an inquiry into Goldman, which has
consistently and publicly denied all allegations levelled against it. The
move has wiped $20bn from the value of Goldman Sachs' equity.

Mr Buffett used the annual meeting to defend the bank – with whom he has worked closely for 44 years – and its chairman, Lloyd Blankfein.

"I just don't see this as reflecting on Lloyd," he said.

The 78-year-old investor – ranked the third richest man in the world by Forbes magazine with a fortune of $47bn – took aim at ACA, describing the bond
insurer as having "drifted" into insuring synthetic debt
structures which it did not understand. On RBS, whose ABN Amro arm insured
ACA's part of the Abacus transaction and lost $841m, he said: "It's a
little hard for me to get terribly sympathetic that a bank made a dumb
credit deal."

Based on Berkshire's own activities in bond insurance, Mr Buffett said that he would never assume to know what investors on another side of a particular
trade he was involved in were thinking.

"When we [Berkshire] trade with them [Goldman], they could very well be shorting a product, they do not owe us a divulgence of their position more
than any reason why we need to explain what we are doing with our position."

He went on to reveal that he "loves" Berkshire's stake in Goldman – which pays an annual dividend of $500m, equivalent to $15 a second.

Meanwhile Mr Blankfein, admitted on American public television that some of the emails revealed by an Congressional committee last week were damaging to
the bank's public image.

"There were some e-mails where some people were projecting I would say, at best indifference, and at worst a callousness. It's inexcusable if 10
people think that way or thought that way."

The comments came after Mr Blankfein denied, before the US Senate's sub-committee on investigations, that the bank has a moral obligation toward
its clients.