Buffett to Congress: Bail out economy or face 'meltdown'

Billionaire Warren Buffett told congressional negotiators that if they can't agree on a proposed financial bailout, the nation will face "its biggest financial meltdown in American history".

WASHINGTON, DC - Billionaire Warren Buffett told congressional negotiators that if they can't agree on a proposed financial bailout, the nation will face "its biggest financial meltdown in American history," two sources familiar with the talks said.

Word of Buffett's omen came as House Speaker Nancy Pelosi announced "great progress" in reaching a deal on the White House's proposed $700 billion bailout of the financial system.

Buffett, whom Forbes magazine has placed at No. 2 on its 2008 list of richest Americans, was one of several business experts whose opinions were sought, Sen. Kent Conrad, D-North Dakota, told reporters Saturday.

Buffett is chairman and CEO of Berkshire Hathaway Inc. His wealth is estimated at $50 billion. Buffett was consulted by telephone, Conrad said. Watch leaders announce progress on the deal »

Conrad, who heads the Senate Budget Committee, said he was involved in some of the talks, though he is not on the formal negotiating team, which is made up of Rep. Roy Blunt, R-Missouri; Sen. Judd Gregg, R-New Hampshire; Sen. Chris Dodd, D-Connecticut; and Rep. Barney Frank, D-Massachusetts.

They are expected to reconvene Sunday, but no time has been given. The goal is to reach consensus on a package and announce a deal Sunday, in time for the start of financial markets around the world, Gregg said.

Pelosi is hoping to have a draft of the proposal posted online by noon, he said.

Flanked by Senate Majority Leader Harry Reid and other congressional leaders, Pelosi announced early Sunday that a long evening of talks on Capitol Hill had yielded progress.

"We have to get it committed to paper so we can formally agree," Pelosi said.

Under the tentative deal, a board including the treasury secretary, secretary of commerce, head of the Securities and Exchange Commission and chairman of the Federal Reserve would oversee the rescue plan, Conrad said.

The $700 billion would be disbursed in stages, with $250 billion made available immediately. The Treasury also would establish an insurance program -- with premiums paid by the industry -- to mitigate taxpayer losses. The deal would probably also include some curbs on the compensation of executives at companies that participate. Watch what the bailout could mean for you »

The government would get the right to receive equity stakes in the companies that sell their assets. The measure is an attempt to reduce fiscal risk to taxpayers.

House Republicans have not signed off on the plan, but Blunt said Saturday he would present it to the GOP caucus Sunday morning after it's on paper.

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"I think we're going to be able to have an announcement tomorrow, but these are difficult issues," Blunt said.

Reid said the "breakthrough" just before midnight Saturday was made possible by an idea proposed by Pelosi. Her idea involved how to address questions about whether taxpayers would be protected in the bailout, a senior House Democratic aide said.

"We've made great progress toward a deal which will work and will be effective in the marketplace and effective for all Americans," Treasury Secretary Henry Paulson said, standing beside Reid and Pelosi. iReport.com: Are you upset about the bailout?

Paulson first announced the plan September 18.

Frank, the House leader on the issue, said the final plan will be a compromise that includes some of the original Bush administration proposals and elements demanded by congressional negotiators.

"I do think we have reached as good a product as you can in this democracy, given all the interests," Frank said.

Gregg said he saw "dramatic progress toward accomplishing something that is critical for the American people."

"We can't underestimate what we face as a threat relative to a fiscal meltdown and the impact it would have on Main Street," he said. "This is about people's jobs. It's about people's savings. It's about people's ability to participate in commerce and send their kids to school and be able to borrow money to run their small businesses."

The Bush administration was "very pleased with the progress made tonight in these discussions," White House spokesman Tony Fratto said. He applauded the "hard work on both sides of the aisle."

The Bush administration is seeking authority for the Treasury to buy as much as $700 billion in troubled mortgage assets that are weighing down banks and other financial institutions.

If enacted, it would be the most dramatic and extensive government intervention in the economy since the Great Depression. The aim is to unfreeze the credit markets -- short-term lending among banks and corporations -- by giving the Treasury authority to purchase bad assets from banks and other financial institutions.

The core of the problem is bad real estate loans that have led to record foreclosures when the housing bubble burst and home prices declined.

In the past two weeks, the banking world and Wall Street have been reorganized by a wave of collapses and mergers.

The most recent development was Thursday's seizure by federal regulators of Washington Mutual, once a major mortgage lender and the nation's largest thrift.

Thrifts are entities -- such as savings banks and saving and loans -- that are set up to hold deposits for individuals.

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