"If I did not think the government was going to act I would not be doing anything this week. I might be trying to undo things," Buffett said in an interview on CNBC. "I am betting that the government is going to do the rational thing. It would be a mistake to do anything if the government was going to walk away from the . . . proposal [by Treasury Secretary Henry M. Paulson Jr.]. There is just no telling what would happen."

Calling the current situation an "economic Pearl Harbor," Buffett said that recent events brought the United States "very close to a system that was dysfunctional, that would have gummed up the economy in a way that would have taken years and years," to resolve.

Action on the Paulson plan "is absolutely necessary to avoid going over the precipice."

The administration's plan to buy troubled mortgage loans from banks and financial companies heads for its second day of hearings on Capitol Hill today, amid both widespread criticism of its terms and an underlying sense among lawmakers that something needs to be done to prevent financial markets from locking up entirely. Paulson has proposed spending up to $700 billion buying troubled mortgage loans and related securities from banks and financial companies, clearing from their books a problem that has clogged markets around the world.

President Bush, in New York, said he remained confident that the "give-and-take" of the legislative process would produce a strong plan to respond to the financial crisis.

"I am confident that when it's all said and done, there will be a robust plan. And there needs to be," Bush said.

The price tag of the current plan in particular has sparked a backlash among lawmakers who say their constituents are outraged at the idea of rescuing Wall Street executives who mismanaged their businesses.

Though Buffett said his investment in Goldman was not timed to influence the debate, he made his position clear: that the government needs to act in a matter of days, not weeks, or the problems will get worse, potentially damaging the ability of businesses to obtain the money they need to operate. Rather than costing taxpayers, Buffett said, the rescue plan -- if handled correctly -- should turn a profit as the federal government buys troubled assets at a steep discount.

"It should be a lead pipe cinch to make 10 percent at the type of prices that exist now," Buffett said. "The government is getting $700 billion of assets at what I regard as attractive prices. . . . If I could borrow $700 billion at the government's terms, I'd be doing this."

Buffett's investment in Goldman Sachs, restructured this week as a bank-holding company, represents a major vote of confidence in the battered financial system from one of the country's most respected investors. U.S. markets were up slightly when trading opened this morning.

Buffett has long touted the value of investing in well-known brand names such as Coca-Cola and Kraft because they can charge premium prices for their products and services. Goldman Sachs is no exception.

"For sale" signs line the front yards of several houses in a Holl

Senators, including Banking Committee Chairman Christopher

By Lori Montgomery and Paul Kane

Washington Post Staff Writers
Tuesday, September 23, 2008; Page A01

Democratic leaders said they were near agreement with the Bush administration yesterday on key provisions of a massive plan to revive the U.S. financial system, but the two sides remained at odds over other issues and were struggling to gain the support of rank-and-file lawmakers on both sides of the aisle.

Although the White House has warned of severe consequences if the bailout plan is not approved by Friday, lawmakers crafting the measure said their work may well stretch past that deadline.

The Bush administration is resisting changes to the measure being sought by Democratic leaders and many Republicans, including one that would grant the government authority to cut executive pay at firms that participate in the bailout and another that would guarantee that taxpayers share in the profits if those firms recover financially.

Meanwhile, rank-and-file lawmakers -- returning to Washington after a weekend in their districts -- voiced outrage that taxpayers were being asked to pay for the excesses of Wall Street and that Congress was being prodded to rubber-stamp the biggest federal intervention in the private market since the Great Depression. While Democratic leaders said they could embrace the bailout plan with certain modifications, a growing minority of lawmakers were starting to question the very premise of the Treasury Department's proposal.

Sen. Richard C. Shelby (Ala.), the ranking Republican on the Senate Banking Committee, yesterday issued a statement saying he was "concerned" that the bailout plan was "neither workable nor comprehensive, despite its enormous price tag.

"In my judgment, it would be foolish to waste massive sums of taxpayer funds testing an idea that has been hastily crafted, and may actually cause the government to revert to an inadequate strategy of ad hoc bailouts," Shelby said, urging Congress to "immediately undertake a comprehensive, public examination of the problem and alternative solutions rather than swiftly pass the current plan with minimal changes or discussion."

Lobbyists have swarmed Capitol Hill to press lawmakers for changes to the legislation. Representatives of community advocacy groups from around the country yesterday appealed to Federal Reserve Chairman Ben S. Bernanke to include homeowners in the bailout.

Despite the pressures, Rep. Barney Frank (D-Mass.), who is taking the lead for Democrats in talks with Treasury Secretary Henry M. Paulson Jr., insisted that the measure was moving forward.

"There was nothing on Friday. There was a bill on Saturday. There's a lot more agreement today than there was on Saturday. So a great deal of progress has already been made," said Frank, who chairs the House Financial Services Committee.

Frank said Paulson agreed to government oversight of the bailout program, including an independent board that would monitor the expenditure of $700 billion to take troubled mortgage-related assets off the books of faltering firms. The three-page proposal Paulson gave lawmakers over the weekend would have permitted him to run the program without review by other federal agencies or the courts.

Frank said Paulson also agreed that the Treasury should use its power as the new owner of billions of dollars in mortgage-backed assets to assist homeowners at risk of foreclosure. Democrats are pressing for provisions to require the Treasury to force banks to rewrite bad loans for struggling homeowners and to forgive a portion of their debt, using programs at the Federal Housing Administration and other agencies.

Treasury officials confirmed that they were in talks on those issues and were "making good progress." However, big disagreements remain, both sides said.

Approval paves the way for bankrupt investment bank to unload businesses that employ 9,000 U.S. employees.

AMERICA'S MONEY CRISIS

• Treasury's bailout proposal
• Bush wants OK to spend $700B
• Judge OKs Lehman unit sale to Barclays
• Big bailout: Where things stand
• 'Sobering moment'

Barclays' big bargain

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NEW YORK (AP) -- A bankruptcy judge approved a plan just after midnight Saturday under which Lehman Brothers will sell its investment banking and trading businesses to Barclays.

The deal was said to be worth $1.75 billion earlier in the week but the value was in flux after lawyers announced changes to the terms on Friday. It may now be worth closer to $1.35 billion, which includes the $960 million price tag on Lehman's Midtown Manhattan office tower.

Lehman filed the biggest bankruptcy in U.S. history Monday, after Barclays (BCS) declined to buy the investment bank in its entirety.

The British bank will take control of Lehman units that employ about 9,000 employees in the U.S.

"Not only is the sale a good match economically, but it will save the jobs of thousands of employees," Lehman lawyer Harvey Miller of Weil, Gotshal & Manges said.

Paulson Describes Moves as 'Powerful Tactical Steps'

Senate Majority Leader Harry Reid, D-Nev., speaks to reporters after members of Congress met with SEC Chairman Chris Cox, 3rd left, and Treasury Secretary Henry Paulson, fourth from left, Speaker Nancy Pelosi, D-Calif., and Federal Reserve Board Chairman Ben Bernanke. right. Congressional leaders met with financial leaders late into the evening Thursday, Sept. 18, 2008 on Capitol Hill in Washington. (Lauren Victoria Burke - AP)

The Federal Reserve has requested that the Treasury Department deposit $40 billion with the central bank in an effort to help the Fed continue to stabilize the financial markets and address concerns about whether it is overstretched.