How a call from Buffett affected how the government saved the U.S. economy

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FRI, DEC 14, 2018

WARREN BUFFETT WATCH
 

Warren Who? Buffett's late night phone call and the 2008 bank bailouts

 

At first, an "exhausted" then-Treasury Secretary Hank Paulson thought he had been woken up by a phone call from Warren, his mother's handyman.

 

It was actually a late night phone call from Warren Buffett.

 

In "Panic: The Untold Story of the 2008 Financial Crisis," a Vice Special Report that aired this week on HBO, Paulson talks about his conversation with Buffett in October, 2008.

 

Congress had just passed a bill creating TARP, the $700 billion "Troubled Assets Relief Program" that was meant to buy assets from failing banks. But it wasn't enough to ease the panic in financial markets.

 

"We needed something that was going to work much quicker and be more powerful," Paulson says in the documentary.

 

Buffett suggested it would better to put more capital in the banks than to buy the assets.

 

Paulson says it was "an idea which was a germ of what we did." Later that month, the Treasury Department tapped TARP for $250 billion and injected it into the banking system as part of an enormous economic intervention that remains controversial to this day.

 

Earlier this year, for the CNBC documentary "Crisis on Wall Street: The Week That Shook the World," Buffett told Andrew Ross Sorkin that "at some point the government has to step in. When everybody in the world wants to deleverage, there's only one party that can leverage up. There's just one party. And if for some reason they don't do it, you've had it." 

 

That's in the 18-minute section of the interview that appears above. You can watch all 40 minutes in CNBC's Warren Buffett Archive.

If all that isn't enough, you can see Buffett interviewing Paulson in 2010 at an event televised by C-Span 2. 

BUFFETT AROUND THE INTERNET

 
 

HIGHLIGHTS FROM THE ARCHIVE

 
 

With all three of the major U.S. stock indexes closing in correction territory, (down at least 10% from their 52-week highs), for the first time since March, 2016, it's a good time to go back and see Buffett and Charlie Munger talking about how they look at the stock market.

 

This collection of eight clips spanning 24 years from our Buffett Archive includes Buffett explaining why he never predicts what the stock market will do, and Munger warning investors not to have a "fretful disposition."

BERKSHIRE STOCK WATCH

 
 
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Berkshire Hathaway Class A shares closed at $300,320 Friday, down 8.5% over the previous four weeks, and up 1.5% from one year ago. Like the big stock indexes, it is also in correction territory with a drop of 10.6% from its 52-week high of 335,900 in October.

Berkshire Hathaway Class B shares closed at $200.00, down 8.4% over the previous four weeks, and up 1.7% from one year ago. It's down 10.7% from its October high of $224.07.

The benchmark S&P 500 index closed at 2599.95, down 5.0% over the previous four weeks, and down 2.0% from one year ago. It's off 11.6% from its 52-week high.

QUESTIONS OR COMMENTS

 
 

Please send any questions or comments to buffett@cnbc.com.

 

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