Buffett says Fed avoided chaos in Bear bailout

By Jonathan Stempel

OMAHA, Nebraska (Reuters) - Warren Buffett said on Saturday said the U.S. Federal Reserve avoided financial market "chaos" in coordinating the March bailout of Bear Stearns Cos BSC.N, which faced imminent bankruptcy before agreeing to be acquired by JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz).

The central bank, led by Chairman Ben Bernanke, helped broker the buyout, after liquidity evaporated at Bear, which had been Wall Street's fifth-largest investment bank.

JPMorgan, the third-largest U.S. bank by assets, agreed to pay $10 per share for Bear, and the Fed agreed to guarantee $29 billion of Bear's assets.

"I think the Fed did the right thing in stepping in on Bear Stearns," Buffett said at the annual meeting of his Berkshire Hathaway Inc (BRKa.N: Quote, Profile, Research, Stock Buzz) (BRKb.N: Quote, Profile, Research, Stock Buzz) insurance and investment company. "Just imagine the thousands of counterparties around the world having to undo contracts."

Buffett said a record 31,000 shareholders attended the meeting in Omaha's Qwest Center, including an overflow crowd in halls outside the main arena.

He and Berkshire Vice Chairman Charlie Munger fielded questions for five hours, often humorously, on investing, the economy, politics and life.

Attendance has soared since Berkshire in 1996 created Class B shares worth 1/30th of a Class A share. These made it easier for ordinary investors to invest with Buffett, the world's richest person.

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