Linda Shen and Andrew Frye
Wednesday, Sept 24, 2008
Billionaire investor Warren Buffett, calling the market turmoil “an economic Pearl Harbor,” said Treasury Secretary Henry Paulson’s $700 billion proposal to prop up the U.S. financial system is “absolutely necessary.”
“The market could not have taken another week” like last week, Buffett told CNBC today, a day after saying his Berkshire Hathaway Inc. will buy a $5 billion stake in Goldman Sachs Group Inc. “I think it was the last thing Hank Paulson wanted to do, but there’s no Plan B for this.”
Paulson and Federal Reserve Chairman Ben S. Bernanke are pushing Congress to quickly approve the plan to remove illiquid assets from the banking system. Lawmakers have balked at rubber- stamping the proposal, with Democrats demanding it include support for homeowners and limits on executive pay and Republicans questioning the plan’s reach and size.
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“I am betting on the Congress doing the right thing for the American public and passing this bill,” Buffett said. The economy is “everybody’s problem,” he said, likening it to “a bathtub — you can’t have cold water in the front and hot water in the back.”
Berkshire is buying the stake in Goldman, Paulson’s former firm, after three of the investment bank’s biggest competitors went bankrupt or were forced into emergency sales. He has already agreed to spend at least $25 billion this year to acquire companies, finance buyouts and purchase securities for Omaha, Nebraska-based Berkshire.