Suggesting US Treasury to team up with private investors legendary investor Warren Buffett has said the price tag of the $700-bn package may have to rise but did not estimate how much more money would be needed to bring stability.
"The US Treasury team with private investors to buy the distressed mortgage assets at the centre of the controversial $700 bn Wall Street bailout, and said the price tag of the rescue plan may have to rise," Buffett was quoted as saying by Fortune magazine in an online report.
On Wednesday, the US Senate had approved the package with an overwhelming number of lawmakers favouring the passage of the bill. The modified rescue plan will now go for voting in the House of Representatives, which had rejected the original proposal this week.
Speaking at a summit organised by Fortune on Thursday, the billionaire investor who is the chairman and chief executive of Berkshire Hathaway warned described the problems faced by world markets as "unprecedented".
Buffett said the bill isn't perfect, but it's a crucial step in the right direction and warned it will take a while to work and that the economy is going to struggle even with its passage, Fortune said.
"It will cost more to solve this problem today than it did two weeks ago," Buffett was quoted as saying, referring to when Treasury Secretary Henry Paulson's first proposed that Congress help rescue Wall Street after Lehman Brothers went bankrupt, Merrill Lynch was sold to Bank of America, and American International Group had to be rescued.
"Buffett didn't estimate how much more money would be needed to buy enough toxic mortgage investments in order to create a more stable market and get credit flowing again," Fortune said.
The legendary investor suggested a plan that would allow Treasury and private investors to buy assets together. Quoting him, the report said that his proposal would kickstart demand for mortgage-backed securities, help find a market price for these troubled assets and make it more likely that taxpayers would be made whole or even come out ahead in the bailout.
According to the report, under Buffett's plan Treasury would lend hedge funds, Wall Street firms or any other investors' 80 per cent of the price for distressed assets. Investors would benefit from borrowing at lower rates available to the Treasury. But the government would get first claim on the sale of those assets, which means it would get its loan back plus interest and possibly turn a profit. Only then would investors see a penny.
Buffett also noted that presence of the government in the transactions would raise the price of assets above the absolute firesale levels for which they could now be sold.
Ever since the financial turmoil began, Buffett has made investments in Wall Street giants -- Goldman Sachs and General Electric. While he pumped in $5 billion in the global bank, Buffett has invested another $3 billion in the diversified conglomerate.
The report further said that the credit crisis has increased the volume of calls Buffett has gotten from companies looking for him to invest.
"The fellow, on the other end, usually the CEO, says, the market looks at us as a toad. Berkshire Hathaway is looked at as a princess. And if you would just kiss us, we would turn into this handsome prince," Buffett was quoted as saying and added, "And I say, 'No, we would turn into a toad.'" Even so, he added, "we've kissed a few."
Buffett suggested he is still looking for deals and thinks it is a good time to be buying in the market, the report added.
