Like J.P. Morgan, Warren E. Buffett Braves a Crisis

But those were dire economic times. Morgan gathered his fellow financiers at his Manhattan mansion and hammered out a rescue plan. After a few rocky weeks, the panic subsided.

“In 1907, Morgan was not only committing some of his own money but also organizing the entire financial community to join in the rescue,” said Ron Chernow, a business historian and the author of “The House of Morgan” (Atlantic Monthly Press, 1990).

Indeed, Mr. Chernow said, one motivation for creating the Federal Reserve in 1913 was that Morgan would not be around forever. Morgan died that same year.

Morgan also used the power of his personality and public statements to try to sway market behavior and psychology. In the current crisis, when authorities became concerned that short-sellers were accelerating the stock-market swoon, the Securities and Exchange Commission issued a legal order prohibiting short-selling in the shares of roughly 800 companies.

In 1907, financial policies were less formal. Morgan simply stated that short-sellers, who bet that a company’s share price would drop, “shall be properly attended to,” said John Steele Gordon, a business historian and author.

His words were to be taken as an implied threat, and a reminder that he was watching. “Nobody wanted to find out what that might mean,” Mr. Gordon explained. “In Morgan’s day, the world was so much smaller, and Morgan was so powerful.”

The estimated $44 billion in cash that Mr. Buffett’s company, Berkshire Hathaway , has on hand is a modest sum compared with the vast size of today’s financial markets. So he can make selective investments but not turn things single-handedly.

At a time when government looms so much larger in the economy than it did a century ago, Mr. Buffett, unlike Morgan, is not directly involved in the current rescue. Yet Mr. Buffett has said that the government has asked for his advice, and he knows and admires the architect of the rescue package, Treasury Secretary Henry M. Paulson Jr.

Mr. Buffett, according to Ms. Schroeder, has over the years become more comfortable and more committed to speaking out on public issues. “It’s not lost on him that people trust him more than they trust politicians,” she said.

Mr. Buffett still speaks to the press only occasionally, and he declined to be interviewed for this article. But after the House of Representatives rejected the rescue plan last Monday, Mr. Buffett got a call from Charlie Rose, the television interviewer, who has known Mr. Buffett for years. He urged Mr. Buffett to appear on his PBS interview show as soon as possible.

“I told him, ‘You have to do this,’ ” Mr. Rose recalled in an interview on Saturday. “ ‘No one has your credibility, and people want to hear what you have to say.’ ”

Mr. Buffett agreed to do it, and Mr. Rose flew to San Diego, where Mr. Buffett would be on Wednesday. The hourlong interview on Wednesday night was vintage Warren Buffett: calm, plain-spoken and wry.

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He called the current crisis an economic Pearl Harbor, requiring immediate action. Its biggest single cause, he explained, was the real estate bubble. “Three hundred million Americans, their lending institutions, their government, their media, all believed that house prices were going to go up consistently,” he said. “Lending was done based on it, and everybody did a lot of foolish things.”

As far back as 2003, Mr. Buffett had warned that the complex securities at the center of today’s troubles — once so profitable, but now toxic — were “financial weapons of mass destruction.” These securities were engineered by the math quants on Wall Street, and in the interview Mr. Buffett expressed his disdain: “Beware of geeks bearing formulas.”

To help pay for the rescue, the government should raise taxes on the wealthy, Mr. Buffett suggested. “I’m paying the lowest tax rate that I’ve ever paid in my life,” he said. “Now, that’s crazy.”

On Friday, after public sentiment shifted, the House passed the financial rescue package. But the markets are still weak, and it remains to be seen whether Mr. Buffett’s recent investments will prove to be wise ones.

“It’s a high-risk moment, and I think he may have ventured into the waters prematurely,” said Mr. Chernow, the historian. “But Warren Buffett is worth many billions of dollars, and I am assuredly not.”

Copyright © 2011 The New York Times

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