Buffett backs $700 bln US bailout
Billionaire investor Warren Buffett called the $700 billion US bailout plan "absolutely necessary" to help pull the financial system out of an "economic Pearl Harbor."business Updated:
Billionaire investor Warren Buffett called the $700 billion U.S. bailout plan "absolutely necessary" to help pull the financial system out of an "economic Pearl Harbor."
Speaking on CNBC television on Wednesday, the 78-year-old Buffett also called on Congress to leave no doubt by Friday that a bailout would be adopted, or risk throwing markets and the economy into further turmoil.
"We were very, very close to a system that was totally dysfunctional, and would have not only gummed up the financial markets but gummed up the economy in a way that would take us years and years to repair," Buffett said, referring to recent events.
The last few weeks have been marked by the U.S. takeovers of mortgage companies Fannie Mae and Freddie Mac the government bailout of insurer American International Group Inc, the bankruptcy filing of Lehman Brothers Holdings Inc, and the pending sale of Merrill Lynch & Co Inc to Bank of America Corp .
U.S. Treasury Secretary Henry Paulson and U.S. Federal Reserve Chairman Ben Bernanke are pushing Congress to approve the taxpayer-funded plan that would let the government buy illiquid assets from lenders.
Buffett said the plan "is absolutely necessary, in my view, to really avoid going over the precipice."
Some Democratic lawmakers are demanding more assistance to homeowners and curbs on executive pay, while some Republican lawmakers have questioned the plan's size.
"Republicans and Democrats, they've got the interest of the country at heart, and I think that they will do the right thing, but I hope they'll do it soon," Buffett said.
Paulson ran Goldman Sachs Group Inc before taking the Treasury job in 2006. Berkshire Hathaway Inc, Buffett's insurance and investment company, announced a $5 billion investment in Goldman Tuesday.
"I'm not buying a cross-section of banking institutions," Buffett said. "I certainly have confidence in Goldman, and you could say it's a vote of confidence in Congress to do the right thing."
As lenders try to reduce balance sheet risk, Buffett said the government should buy some of the assets they unload, but not at inflated prices.
"There is no one that can leverage up like the United States government," Buffett said. "If they do it right, and I think they will do it reasonably right ... they'll make a lot of money."
Buffett also said the next U.S. president, who takes office in January, should consider keeping Paulson at Treasury.
"I would ask (Paulson) to stay on," Buffett said. "The guy pays an enormous price to do it. He's probably sleeping three or four hours a night. He knows the markets, he's got the interest of the country at heart. So I think if I were either Barack Obama or John McCain and found myself in the White House in January, I would go down there and say, 'Hank, do me a favor, stick around another year.'"