Warren Buffett's $5 billion public vote of confidence in Bank of America, happily for him, does not require actual confidence. The terms of the legendary investor's deal, which grants Buffett's Berkshire Hathaway $5 billion in perpetual preferred stock and warrants to buy BofA stock at just over $7 a share, include no lockup period.

Barring the bank's failure, Buffett will earn about $300 million in dividends annually for his public endorsement and far more if its stock recovers over the next decade.

Among residential finance firms, BofA ranks first in servicing rights and second in loan production, though it has been cutting back aggressively in both areas over the past 12 months.

For BofA, the Buffett deal's primary attraction may be the prospect that Berkshire Hathaway's attention will prompt other potential investors to more favorably re-evalaute its management, legal risk and capital adequacy. To the folksy but hard-nosed Buffett, the deal likely appears a far less risky proposition.

"It's not a vote of confidence for the company because he [Buffett] has no downside risk," says Paul Miller, managing director of FBR Capital Markets. "We know Bank of America's not going to fail. The question is, can it perform?"

Buffett's upside is substantial: Berkshire will earn its $300 million in annual dividends until Bank of America buys it out at a premium; Berkshire has also received warrants valued at more than $3 billion, according to the Black Scholes options pricing model.

Based on current prices for Bank of America's perpetual preferred stock, Buffett's $5 billion investment bought him more than $7 billion in value.

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