Buffett warns on economy, backs Paulson plan

25 September 2008

Warren Buffett has warned that the US financial system faces an "economic Pearl Harbor".

The legendary investor and multi-billionaire also urged Congress to pass treasury secretary Henry Paulson's proposed $700 billion "bad bank" fund, which will allow firms to sell on their toxic assets.

Mr Buffett made his remarks following his purchase of $5 billion of preferred stock in US investment bank Goldman Sachs, guaranteed at a ten per cent dividend.

As part of the deal, he retains the right to buy the same amount in common stock at any point over the next five years.

Speaking to CNBC the "sage of Omaha", 77, commented: I'm not saying the Paulson plan will eliminate the problems but it's absolutely necessary, in my view, to avoid going off the precipice."

He added: "I bet they'll make a profit…I would love to have $700 billion at treasury rates to buy fixed-income securities - there's a lot of money to be made."

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development