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Berkshire Hathaway
BRK.A,
BRK.B,
President and CEO Warren Buffett on Saturday praised the Federal Reserve’s handling of the market crisis that accompanied the deepening of the coronavirus crisis in March, comparing President Jerome Powell to the late Paul Volcker, who was He claimed to have tamed runaway inflation in the late 1970s and early 1980s. “He and Jay Powell could not seem more different in temperament … but Jay Powell, in my opinion, and the Fed board belong there on the pedestal” with him, Buffett said in remarks at the Berkshire annual meeting, which It was held online. year due to the COVID-19 pandemic. Buffett said the Federal Reserve’s muscular response to a nearly frozen Treasury market and other financial turmoil in March was crucial to avoiding further carnage. The conditions were creating fear and “fear is the most contagious disease you can imagine,” Buffett said, with conditions approaching a “total freeze” in the credit markets before the Fed took action. He said that all companies that issued bonds in late March and April should write a letter of thanks to the Fed, because the issue could not have taken place if the central bank had not acted with “unprecedented speed and determination.” While no one knows exactly what the consequences of the massive expansion of its Federal Reserve balance sheet will be, “we know the consequences of doing nothing and that would have been the trend of the Federal Reserve for many years.” Buffett said such incidents illustrate why Berkshire Hathaway carries a large amount of cash, including a large number of Treasury bills. While you don’t necessarily need a stack as big as what’s on the books now, you do want to be prepared for a scenario where there is no Fed acting aggressively and in any case you don’t want to rely solely on ” kindness of strangers but in the kindness of friends. “
