Warren Buffett joined the Fox Business team at noon ET today to talk turkey about the government's rescue of Fannie Mae (FNM) and Freddie Mac (FRE). He was his usual funny, pointed, smart self but gave us something to think about when it came to valuing the two embattled mortgage companies. Buffett, one of the world's richest humans and the most brilliant investor of our time, knows how to value a company. It's his specialty, okay? He has an uncanny ability to break down the assets and debt and all the gobbledegook that makes up a company and then calmly decide, "Buy" or "Don't even consider touching with a 10-foot pole." When we asked him, "Warren, would you buy either of these companies today?" His response: "Given a choice looking three years out whether to be long or short, I'd be short. But then again, shorting these companies is like jumping off a pancake!"It's not exactly a gutsymove.CLASSIC BUFFETT.
He told Cheryl, Eric, Neil and me that he agrees with Treasury Secretary Henry Paulson's decision to spray government bullets all over these two companies with his financial bazooka in an effort to rescue FNM and FRE from its current management and current situation. When we asked whether this sent a message to a bunch of other floundering companies that they, too, might be able to beg for a similar rescue package, he said, "Well, they can beg but they won't get it...I don't think Linens-n-Things can go down to Washington and say, 'it's in the national interest to bail us out.'" His point being that anyone can ask, but only the biggest financial names will get the helping hand.
You guys know I've been highly critical of a government bailout plan, but I've learned something today. I'm a big free marketeer but guess what? The free markets sometimes don't work. That's when, in our great society, the government steps in. I get that. Totally understand, but that doesn't mean I can't worry that a year or two from now, we'll look back and see that this $200 billion dollar infusion into these horribly run companies will have only mortgaged the future for the next generation. Our deficit is so huge, so monstrous that we've now come to the point where we're saying, "What's another $200 billion?"