BUFFETT: Mm-hmm.
BECKY: Brent from Morrison, Colorado writes in, he's got a question very specifically about what's happening with taxes. He says, "Which do you think's more valuable to the economy right now? Raising taxes or lowering them?"
BUFFETT: Well, I think that on people making anything less than a lot of money, I think lowering taxes is a good idea. Now, bear in mind, we're going to spend 3.6 trillion or something like that in the next year. I mean, somebody has to get taxed, and nobody likes to be taxed, so--and I've expressed my views probably in the past that I think that guys like me have gotten off too light and they--just generally, and the IRS just came out with something the other day that the 400 top Americans in 2006 in terms of their taxable income paid at a rate of 17 point something percent, which was the lowest since they've ever started the figures, and they had 29 percent about 12 or 13 years earlier. So I think that too much has been done for me and too little has been done for the people that work here at the Nebraska Furniture Mart. But I don't--we're going to be huge gap in revenue and another 100 billion that helps the people at the lower end I am basically all for whatever the number may be. I don't think anything that helps me is needed one bit in terms of this economy. So I think that, as we move forward, I hope that the tax system gets more equitable, at least as I see it, in terms of treating the people that don't happen to be born just wired the right way and everything. They're paying higher rates than I pay just because I'm good at capital allocation.
BECKY: Is that something that you think should be taken on immediately? Or do you think it needs to wait until the economy gets through the roughest patches?
BUFFETT: I think, on balance, we ought to defer most of the things that cause people to get very riled up. I think we ought to--I think the message out to continuously be, `We are in an economic war. We're going to solve this together. We're not going to use it as a way to get all kinds of changes made.' And I might like to see a change in the tax code and maybe--but right now I'm for doing the part that helps the people that are the worst off and whatever doesn't cause--whatever doesn't pull us apart. And I don't think we should have lots of things now that cause us to become disunited. We have a common interest and a huge objective, which is to get this economy working well, and that will take people working together.
BECKY: Richard from Forestdale, Massachusetts, writes in his question, number 334 is "Some have opined that the Federal Reserve must, at times, be the lender of last resort. Are the Fed and the Treasury now the spenders of last resort?'
BUFFETT: Well, the Fed--that's a good question. The Fed has become--I think the Fed of New York, for example, had 9 billion of deposits from banks throughout the country a year ago. Now they have 450 billion. I mean, they have become--can you imagine that? That is a huge change in behavior by banks. They have become the intermediary, almost, for banks. I mean, the Fed is the one place where everybody goes. They can print money, you know.
BECKY: Sure.
BUFFETT: I mean, basically, so the--they are the--they have a huge role to play in this, and I think they've been playing it well. I congratulate Chairman Bernanke. I mean, he did some important things when he needed to do them, and he should be given a lot of credit for that.
BECKY: Joe, you have a question as well?
JOE: Yeah. I'm just thinking of other things.
BECKY: I know where you're going.
JOE: No. I kind of feel like I'm a pesky little gnat. I've got one more--one more thought, Mr. Buffett, and that has to do with, you know, trying to narrow the--what we've seen between the haves and have nots, and I know that you think that, you know, that certain people have been treated too well, others not enough. Some say that EFCA and card check would narrow the disparity. In other words, having unions have more of a say, more companies unionized. Is that a good idea? Or do you think, as a business owner, it would be a negative for the economy?
BUFFETT: I think the secret ballot's pretty important in the country. You know, I'm against card check, to make a perfectly flat statement.
JOE: OK.
BECKY: Wow.
JOE: That's great, thank you. Appreciate it. OK, Beck.
BECKY: I didn't expect that short of an answer either.
JOE: I know. I liked it. I mean, I liked that he gave me an answer. I'm not saying either way how I feel, but I liked that we got it from Warren.
BECKY: (Unintelligible).
BUFFETT: We have loads of unions at Berkshire, and I mean, dozens and dozens and dozens at our various companies, and I understand the reasons for unionization, I mean. And by and large, I think certainly the people that are in unions have not been well treated by the tax code that we've had all the time. I think card check is a mistake. I think that...
JOE: I think it's important for--to hear from things like that. We all support the president, obviously, and we all want to get out of this mess that we're in right now, but that doesn't mean that people like you and people that he admires and listens to can't point to certain things and say maybe that's not such a great idea and that's why we have this dialogue. Right?
BUFFETT: Right.
BECKY: All right.
BUFFETT: Yes, sir.
JOE: Very good.
BECKY: All right. Let's bring in another question from a viewer. Steven from Brookeville, New York, writes in, and this is circling back in a way to some of your comments on the banks earlier, but he says, "President Obama recently stated that buying stocks is a potentially good deal if you've got a long-term perspective on it. So if President Obama were asked about whether buying bank stocks," and Steven lists stocks like Citibank, Bank of America, Wells Fargo, JP Morgan, "Is it a potentially good deal for those with a long-term perspective? What do you think he would say about that, and how would you respond to that question?"
BUFFETT: Well, I don't know what he would say.
BECKY: Yeah.
BUFFETT: He doesn't consult me on his portfolio. I would say that if--well, there's certain banks that are basket cases. I mean, here are--here are 3600 banks since 1934 that the FDIC, one way or another, banks and saving institutions, they've had to bail out.
BECKY: Hm.
BUFFETT: But they didn't bail out the stockholders. So you can--you can lose everything if you buy stock in a bank, and you should be able to lose everything. You just shouldn't lose anything if you loan them money or a deposit. So the question is, whether banks, which have terrific earning power going forward, will be forced to sell stock at ridiculously low prices. And if you take the great majority of banks, which will do fine earning their way out of it, although they'll be more names on this list, you know, a year from now. But if they don't have to sell stock at distressed prices, I think a number of them will do very, very well. I mean, and we own some bank stocks, and I like owning them and I like owning them in the quantities we own them. And the only fear I have, frankly, is that in some kind of a situation, they might be forced to issue a lot of common stock and they don't need to do it. They've reduced their dividends, so they can build equity and they'll build equity at a very rapid rate with the spreads that exist now. So the banking system largely will cure itself. Citigroup may be a special case. I mean, and I'm afraid that in a sense, the American public has sort of taken its view of all banks from what they read about Citigroup all the time. But there are 7,400 banks or something like that in the United States and most of them are just fine. You look at the banks around Omaha, you know, they are not going broke. We had a bank in Loup City, Nebraska, go broke about a month ago, and we'll have another bank go broke someplace in Nebraska, you know, in the next two or three months. But, by and large, they're in good shape, and they are putting on assets with spreads that are terrific.
BECKY: You said that the banking system will take care of itself, that it will earn its way out of this.
BUFFETT: Most of it.
BECKY: Does that mean you think the American taxpayer money that's already been spent on these banks is good? That we'll get that money back?
BUFFETT: I think it's good with overwhelmingly most of the banks, but I think that we're--a good bit of the money is, you know, I think, I think it's--it can be questionable in a few cases, yeah. It can be questionable in a few.
BECKY: You're talking about AIG and Citigroup are some of the names.
BUFFETT: Well, you're--we're talking about anything you want to talk about.
BECKY: AIG and Citigroup are the big names that pop up.
BUFFETT: Yeah. Well, AIG isn't a bank, but there's a lot of money in there.
BECKY: (Unintelligible).
BUFFETT: And it was a huge risk to the system, and it shouldn't be--conditions shouldn't be allowed to recreate itself in the future. But the very fact it shouldn't be allowed to recreate itself in the future, does not that mean that the wrong thing was done in terms of stepping in there in September. That was the right thing. That weekend, you know, we had Lehman and Citi--I'm sorry, AIG was the same weekend Merrill, which got bought by B of A that weekend, but the dominos were lined up. They were lined up and they were huge dominoes, and it's a good thing that they didn't start toppling.
BECKY: OK. I want to get to a question that came from an investment club of seventh and eighth graders who invest $1 million in fake money every year. This is the Grizzell Middle School Investment Club in Dublin, Ohio, and the question is, where do you think gold will be in five years and should that be a part of value investing?
BUFFETT: I have no views as to where it will be, but the one thing I can tell you is it won't do anything between now and then except look at you. Whereas, you know, Coca-Cola will be making money, and I think Wells Fargo will be making a lot of money and there will be a lot--and it's a lot--it's a lot better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage and a few things like that. The idea of digging something up out of the ground, you know, in South Africa or someplace and then transporting it to the United States and putting into the ground, you know, in the Federal Reserve of New York, does not strike me as a terrific asset.
BECKY: There's another question that came in from Keith in Rolla, Missouri. We talked a little bit earlier about GM. You said there needs to be a different plan that's put into place. Do you think it can happen outside of bankruptcy? But his question is, "If GM files for bankruptcy, how will that affect Ford and Chrysler?"
BUFFETT: It would be tough. I mean, Ford has tried very hard to stay out of the government operation, but it would affect the whole economy and I--and particularly now. And I--that's why net I think it would be a mistake to let it go that way, but I think the government ought to hammer out everything it can to make the business model viable at a 12 or 13 million unit a year, and we'll see what they do on that.
BECKY: OK. If we want to get back to some questions, again, about TARP and things that have gone through, there's a question that came in from Jeff in Stockton, New York, who said, "Wouldn't it have been a better idea when the $700 billion TARP was passed by Congress to give it to us?" He means, we the people. "Example, if $30,000 for married couples, 15,000 to singles, get put back into our economy, it'd be up and running." He thinks he can buy a house, purchase an automobile, put money in our banks. People have asked a lot of questions like that. Would it have been better to give everybody $30,000, $100,000?
BUFFETT: Well, the math is a little off because there's close to 120 million households and TARP was 700 billion, so if you divide 120 million, it comes out to a little less than $6,000. But if you could've restored--it was essential that people believe in the financial system. The machine won't work without that. If they believe in that and you're just going to send out $6,000 to every household in the United States, I'm not sure that would've been better for economic activity. But I am not inclined to look back and say this would've been better than that. I mean, if there had been four fewer ships in the Pearl Harbor, then Pearl Harbor would've been better, probably so. We'd have four more to go out, you know, the next day. But forget it. You know, we've got to go forward.
