Buffett Right, U.S. Bank Plan May Cost Nothing

Sept. 25 (Bloomberg) — President George W. Bush, billionaire Warren Buffett and BlackRock Inc.’s Laurence Fink are “absolutely” right to say a $700 billion U.S. plan to buy assets from financial firms may cost taxpayers nothing even with purchases at above-market prices, a top-rated analyst said.

The U.S. in some cases could pay twice as much for subprime- mortgage debt as prices demanded by private buyers and make annual returns of 5 percent, according to Credit Suisse Group’s Rod Dubitsky, whose team was second-ranked for real estate asset- backed bonds in a 2007 survey by Institutional Investor magazine.

“If this was pitched as one of the world’s largest sovereign wealth funds, whose goal was to earn a decent return and support housing and neighborhoods, it would have received a more favorable reception,” he said in an e-mail today.

U.S. Treasury Secretary Henry Paulson last week proposed buying “illiquid assets” to prevent a freeze in lending to U.S. financial companies, corporations and consumers. Bush, Berkshire Hathaway Inc.’s Buffett and BlackRock Chief Executive Officer Fink were among individuals saying this week that taxpayers may lose little, or even profit, on the trade after a slump in mortgage debt.

Others included Pacific Investment Management Co. Co-Chief Investment Officer William Gross and Congressional Budget Office Director Peter Orszag, who yesterday told lawmakers that there is “significant risk of utter financial market chaos” without a package to buy devalued debt.

Further:

Buffett, who this week announced plans to invest in Goldman Sachs Group Inc., said on CNBC yesterday if he had $700 billion on the government’s terms to buy distressed assets he would.

“I think the Treasury will pay back the $700 billion and make a considerable amount of money,” he said. “Unfortunately, I’m tapped out.”