Buffett Deal an Outlier in Market Limbo

You can find more stories like this in our "On the Brink" series.

Warren Buffett's $5 billion investment in Goldman Sachs (GS) may seem like a ringing endorsement for the financial sector, but don't expect the deal to grease the capital wheels for the sector just yet.

Berkshire Hathaway's (BRK.A) first foray into investment banking since taking a stake in Salomon Brothers in the 1970s carries a lot of weight with investors and the wider market. But dealmakers say lots of potential transactions likely will remain in limbo, awaiting the outcome of the proposed $700 billion congressional bailout currently being negotiated on Capitol Hill.

"Transactions that are earlier in the process, people are sort of pausing to think 'Gee, why would I commit to something today, when I'm going to have a much better window on what things look like maybe next week?" says Dan Evans, a partner who works on M&A for law firm Ropes & Gray.

All sorts of potential deals -- from the possible sale of Washington Mutual (WM) to distressed debt transactions -- are up in the air, as buyers and sellers wait to see what type of assets can be sold to the $700 billion proposed fund -- or if it can gain congressional approval at all.

Richard Weiss, who oversees $54 billion as CIO of Beverly Hills, Calif.-based City National Asset Management, acknowledges that the bailout is the big unknown that everyone is focusing on at the moment. But he nonetheless believes the Berkshire investment signals more to come.

"Warren Buffett has been ahead of the curve for as long as I can remember in many different ways in the investment field," he says.