By Jonathan Stempel and Peter Rudegeair
Sept 19 Warren Buffett said on Thursday he would
recommend reappointing Ben Bernanke as Federal Reserve chairman,
while adding that low interest rates have inflated asset values
and complicated his hunt for investments at his company
Berkshire Hathaway Inc.
The billionaire investor spoke one day after the central
bank surprised investors by postponing its expected wind-down of
monetary stimulus, which has in five years more than tripled the
Fed's balance sheet to above $3.6 trillion.
"Since the panic of five years ago, he's done a terrific
job," Buffett said on CNBC television in a joint interview with
Brian Moynihan, chief executive of Bank of America Corp.
Asked if he would reappoint Bernanke when his term expires,
Buffett said: "That's what I would do."
Nevertheless, at an event later Thursday afternoon at
Georgetown University, Buffett said that the Fed's eventual exit
from its monthly bond-buying program will carry unforeseen
"We are in an experiment which hasn't really been tried
before," he said, adding that "buying securities is usually
easier than selling securities."
Berkshire owns more than 80 businesses in such areas as
insurance, chemicals, railroads and clothing, and has more than
$130 billion of equity and fixed income investments.
Some of its money went to Bank of America in August 2011,
when Buffett announced a surprise $5 billion investment in the
second-largest U.S. bank, which has been plagued by bad
mortgages and legal liabilities mainly tied to the former
Countrywide Financial Corp.
The investment included preferred shares with a 6 percent
dividend, plus warrants to buy 700 million shares at about $7.14
per share, and has given Berkshire a paper profit of several
billion dollars because the bank's shares have doubled.
Moynihan said the bank has contracted in size and put many
regulatory issues behind it, leaving it to focus on how best to
grow in a slow-growth economy.
"You have an economy which we see very constructive, growing
at 1.5 to 2 percent," he said. "We don't see a lot of downside
risk... Until unemployment is down, (Bernanke) has to keep this
economy going in the right direction."
One side effect of the economic stimulus has been low
interest rates, which Buffett called a "terribly important"
variable in determining asset prices.
With major stock indexes at or near record highs, it has
been harder for the 83-year-old Buffett, the second-richest
American, to pursue his value investing strategy at Berkshire.
Stocks "were very cheap five years ago, ridiculously cheap,
and that has been corrected," Buffett said. "They're probably
more or less fairly priced now... We're having a hard time
finding things to buy."
Buffett had invested $5 billion in preferred stock of
Goldman Sachs Group Inc and $3 billion in General
Electric Co preferred stock at the height of the 2008
financial crisis. That gave him a reputation as a possible
lender of last resort during times of stress.