Warren Buffett is a one-man bailout machine. For pretty much every major institutions, the Oracle of Omaha is the guy you go to when you want some validation. When Democrats and the White House turned to him for intellectual succor over the need to raise taxes on the wealthy, he complied with a New York Times op-ed last week on how Congress should stop coddling billionaires. And when blue-chip American financial institutions suddenly face harsh market realities, they also turn to Buffett.

That's what Goldman, Sachs and General Electric did in the fall of 2008. And that's what Bank of America, the behemoth still struggling to get out from under the mortgage mess, is doing today. It announced Thursday morning that Buffett's Berkshire Hathaway would invest $5 billion as my Daily Ticker colleagues discuss in the accompanying video.

The playbook is simple. Do a deal on terms that are favorable to Buffett. That sends a signal to the marketplace, and to your own investors. After all, if things were as bad as all the critics were saying, why would the most savvy investor of our era put his capital at risk? Armed with the Buffett seal of approval (and some new cash), the company then goes out and raises more cash from the public. This two-step has proven to be beneficial to the companies, and profitable for Buffett. But ordinary investors should be careful about blindly following Buffett's lead.

In the fall of 2008, General Electric was listing, in part because of the troubles its massive finance arm, GE Capital, had encountered. And so in the fall it turned to Buffett. Buffett agreed to buy $3 billion of preferred shares, which carried a 10 percent annual dividend. What's more, GE could only retire the shares by paying Buffett a 10 percent premium. He also received warrants entitling him to buy a large chunk of shares at $22.25 per share. The warrants were to expire in five years. With the market temporarily calmed, GE also announced it would sell about $12 billion in common stock to the public at $22.50 per share. In other words, GE was able to leverage Buffett's $3 billion (on pretty tough terms) into $12 billion more of capital (on relatively easy terms).

A few weeks later, Goldman, Sachs struck a similar deal with Buffett. On October 23, Berkshire Hathaway agreed to invest $5 billion into the investment bank. The terms were quite similar to the GE deal. The shares bore a 10 percent annual rate, Goldman would have to pay a 10 percent premium to retire them, and Buffett received warrants entitling him to buy a chunk of Goldman shares at $115 per share. The next day, its stock having been buoyed by the Buffett investment, Goldman said it would raise another $5 billion by selling shares to the public at $123 per share.