Warren Buffet, who has been regarded as one of the most powerful men in the world, and also one of the wealthiest, struck again to buy a stake in investment banking giant Goldman Sachs (GS: 135.50, +2.50 (+1.88%)). Buffet has steered away from many Wall Street firms in the past year, but this deal was one that he couldn’t miss. The deal, which has struck a lot of controversy from Goldman Sachs’ shareholders, is a very expensive one for Goldman to do. Lloyd Blankfein, the CEO of Goldman, was extremely worried that the markets didn’t think their balance sheet was well capitalized. After Morgan Stanley agreed to a deal with Mitsubishi UFJ (MTU: 8.95, +0.29 (+3.35%)) for a 20% stake in Morgan Stanley (MS: 27.10, +2.31 (+9.32%)), management at Goldman knew that something had to get done. Buffet’s investment into Goldman Sachs marks one of the biggest expressions of confidence in the today’s financial system.

According to an article in the Wall Street Journal, Buffet received a call on Tuesday while he was at Berkshire Hathaway’s ((BRK.A)) headquarters in Omaha, NB. The call came from a Goldman banker by the name of Byron Trott, who asked Buffet what type of an investment he would make in Goldman Sachs, if any. Mr. Trott, a top banker at Goldman, has had a relationship with Buffet for some time now, advising him on many deals including the investment Buffet made in Mars, Inc a few months ago. Talks escalated very quickly as Buffet has been fascinated with the business model of Goldman Sachs for some time now. The fascination started back when Buffet’s father took him to visit Goldman when he was only 10 years old. By the time Buffet was 25, he had a direct line to Sidney Weinberg, a former Goldman CEO.

The terms of the deal were very positive for Berkshire; Warren Buffet agreed to invest $5 billion in Goldman in exchange for perpetual preferred shares with a dividend yield of 10%. This will set Goldman back roughly $500 million a year, which will be taken directly off their net income in after tax dollars. This means that Berkshire will be making well over $1 million each day from this investment. It will also be extremely expensive for Goldman to redeem these shares, as they must buy them back at a 10% premium. Buffet also has the option to invest an additional $5 billion in common stock at a strike price of $115.