Buffett: No Recovery Despite Government Foreclosures Program
Warren Buffet, the billionaire chairman and CEO of Nebraska-based Berkshire Hathaway, said there is still no sign of even a small recovery from the housing crisis that largely caused the recession despite President Obama’s government foreclosures homes program.
Previously, Buffet wrote in his recent shareholder letter that he supported the government foreclosures program, including the bailouts of distressed debts and companies, but added that the bailouts of financial institutions will have unwelcome aftereffects such as inflation.
Buffet, 78 years old, said he has seen no real recovery in the housing and retail sectors despite federal initiatives such as the government foreclosures program. He said that there are uncertainties even if the markets level off.
This week, Paul Volcker, senior economic adviser to President Obama, said there is an observed leveling off in the national economy; hence there is no need for another stimulus package to add to the $787 billion funding enacted in February, which also included funding for the government foreclosures program.
The national economy contracted in the first quarter at a yearly adjusted rate of 6.1 percent, weaker than what was predicted. The current crisis is considered the worst crisis since the 1957 to 1958 recession.
At Berkshire’s annual meeting this week, record numbers of shareholders are expected to participate after Berkshire posted five consecutive quarters of decreased profits. Rating companies downgraded Berkshire’s top AAA rating because of the declines and Berkshire’s rushed investment in oil company ConocoPhillips.
On February 28, Berkshire announced that its December 2008 book value of $109.3 billion fell by about $8 billion.
Buffett and top executive Charles Munger are expected to discuss Berkshire’s businesses, the nationwide economic condition and the Obama administration’s economic initiatives which may include the effectiveness of the government foreclosures program.
Over 500 financial institutions received more than $390 billion from the government bailout program. This is in addition to the $75 billion allocated for government foreclosures program to help up to 4 million troubled American homeowners to avoid foreclosures.
Buffett and his executives have used recent annual meetings to promote their company as an acquirer of foreign businesses. They also have expressed their pride in their company’s practice of avoiding the reckless practices of many Wall Street financial wizards that largely caused the avalanche of private lender and government foreclosures.
By Cassiano Travareli