Stimulus

Warren Buffett phoned Treasury Secretary Hank Paulson with a stimulus idea when the 2008 financial crisis erupted. It may have saved the US economy

warren buffett hank paulson
U.S. Treasury Secretary Henry Paulson (L) shares a laugh with financier Warren Buffett, Chairman and CEO of Berkshire Hathaway, at the Conference on U.S. Capital Market Competitiveness in Washington March 13, 2007.

  • Warren Buffett phoned Treasury Secretary Hank Paulson at the height of the 2008 financial crisis with a suggestion that likely saved the US economy from an even deeper recession.
  • The famed investor and Berkshire Hathaway CEO proposed the government plow capital directly into banks instead of only buying their distressed assets.
  • Paulson quickly gathered the bosses of the nation’s biggest banks and convinced them to accept billions of dollars in investment.
  • The Treasury demanded preferred stock paying chunky dividends, as well as stock warrants in return, emulating Buffett’s bailout of Goldman Sachs in September 2008.
  • Former President George W. Bush called it “probably the greatest financial bailout ever” and said it “probably saved a depression.”
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Warren Buffett made a late-night call on Saturday, 11 October 2008 that likely spared the US from an even more devastating financial crisis.

The billionaire investor and Berkshire Hathaway CEO dialed then-Treasury Secretary Hank Paulson, the pair said in “Panic: The Untold Story of the 2008 Financial Crisis,” a documentary released in 2018.

“Hank, this is Warren,” Buffett said. A tired and groggy Paulson’s first thought was, “My mom has a handyman named Warren, why is he calling me?”

Buffett was calling about the Troubled Asset Relief Program (TARP), which authorized the Treasury to spend $700 billion purchasing distressed assets from banks. Lawmakers passed it in a desperate effort to shore up the financial system after the collapse of Wachovia and Washington Mutual — two of the greatest bank failures in American history.

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Trump May Be Siding with Democrats on New Stimulus Bill

Trump has echoed some of Democrats’ proposals for a new stimulus bill.

As election day draws near, President Donald Trump appears to be siding with Democrats regarding the size of the next potential stimulus package. On Sept. 16, Trump took to Twitter to send a message to senators in his party: “Go for the much higher numbers, Republicans, it all comes back to the USA anyway (one way or another!)”

Bigger is better

What makes the tweet interesting is that Democrats blocked a Republican coronavirus relief bill just six days earlier, citing fears that too little money would make it to the American public. The Republican proposal included roughly $650 billion in spending. As $350 billion of that would redirect money previously approved for other purposes, it would cut the total new funding to $300 billion.

Comparing bills

To put the failed bill into perspective, the CARES Act, passed by Congress in March, had a $2 trillion price tag. That was enough to give a financial shot in the arm to everyday Americans, help businesses withstand the impact of the virus, enhance unemployment benefits for millions out of work, and protect families from eviction.

By May, when those funds had been depleted, House Democrats passed another bill, estimated to cost around $3 trillion. This bill aimed to extend and expand the CARES Act. For example, nearly $1 trillion was earmarked for cities and states, many under severe financial strain and facing cutbacks and layoffs.

The GOP made it clear the bill was dead on arrival. Still, the two sides managed to find a compromise of sorts, with Republicans offering to spend up to $1.3 trillion to get the economy going. But that was before the Congressional holiday.

No one is quite sure what happened during that long holiday, but by

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