Berkshire Hathaway Chairman and Chief Executive Warren Buffett on Saturday had high praise for the Federal Reserve’s handling of the market turmoil that accompanied the deepening of the coronavirus crisis in March, comparing Chairman Jerome Powell with the late Paul Volcker, who was credited with taming runaway inflation in the late 1970s and early 1980s.

Published: May 2, 2020 at 6:55 p.m. ET, By William Watts

“He and Jay Powell couldn’t seem more different in temperament..but Jay Powell, in my view, and the Fed board belong up there on the pedestal” with him, Buffett said in remarks at Berkshire’s annual meeting, being held online this year due to the COVID-19 pandemic.

Buffett said the Fed’s muscular response to a Treasury market that had nearly frozen and other financial turmoil in March was crucial to averting deeper carnage.

Conditions were sparking fear and “fear is the most contagious disease you can imagine,” Buffett said, with conditions approaching a “total freeze” in credit markets before the Fed took action.

Every company that issued bonds in late March and April should write a thank-you letter to the Fed, he said, because the issuance couldn’t have taken place if the central bank hadn’t acted with “unprecedented speed and determination.”

While nobody knows exactly what the consequences will be of the Fed’s massive expansion of its balance sheet, “we do know the consequences of doing nothing and that’s would have been the tendency of the Fed in many years past.”

Buffett said such incidents illustrated why Berkshire Hathaway carries a large chunk of cash, including a hefty chunk of Treasury bills.

While it doesn’t necessarily need a pile as large as what’s now on the books, it does want to be prepared for a scenario where there isn’t a Fed that acts as aggressively and, any case, doesn’t want to depend not only on the “kindness of strangers but on the kindness of friends.”

Source: www.marketwatch.com