In an interview with cnbc.com, Buffet basically echoes what several high-profile investors are already saying. Namely, that the U.S. Treasury should partner with private investors in the purchase of distressed assets. Buffet predicts that such a move would create real market prices for such assets. Furthermore, he contends that the government can very likely make a profit if it buys these assets at market prices. Ever the man to put his money where his mouth is, Buffet promises to take 1% of the government’s deal.
In his own words: “I think it’s important to have market-based prices. One way to get there would be to have the Treasury, we’ll say, finance various institutions that would put 20 percent of their own money in to buy these mortgage securities that are for sale. The Treasury would lend 80 percent. Whoever put up the 20 percent would not get a dime back until the Treasury got all of its money, plus interest, plus perhaps a share of the profits. You would get real market prices that way. You’d get people that knew the game.”
It’s pretty clear that increased accessibility on the part of investors to the many distressed/toxic accounts (be they mortgage or otherwise) will lead to increased economic activity, as well as to higher returns.
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