Buffett Open to Home-Finance Role as Fannie Future Mulled

Apr 24, 2014 12:26 pm ET

(Updates with comments on Cubs in the 12th paragraph.)

April 24 (Bloomberg) -- Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc., said he’s open to the possibility of his company eventually becoming more involved in housing finance once U.S. lawmakers resolve the future of Fannie Mae and Freddie Mac.

“I don’t see any role for Berkshire in Fannie or Freddie,” Buffett, 83, said yesterday in an interview with Bloomberg Television’s Betty Liu. “There could be some, in some housing arrangement that gets worked out in the future.”

President Barack Obama and a bipartisan group of senators are seeking to wind down Fannie Mae and Freddie Mac while investors including Bruce Berkowitz’s Fairholme Capital Management are betting on the companies and pushing the U.S. to return them to private ownership. Fannie Mae and Freddie Mac keep money flowing in the housing market by buying mortgages from lenders and packaging them into securities.

Buffett said that the government could act as an insurer of last resort in a new system that involves private companies taking initial losses, which is the structure that has been proposed in the Senate.

“I think government has to play a part in housing,” Buffett said. “The 30-year fixed-rate mortgage is very good for the American public and I think that you will need government participation in some way to bring the costs down.”

The housing-finance companies, which were taken over by the U.S. in 2008, received $187.5 billion in taxpayer aid and paid dividends of 10 percent on the government’s stake until Treasury amended the terms of the bailout and began taking all of their profits instead.

Buffett’s Warning

Berkshire owned stakes in both firms before the housing collapse. Buffett has said he made a major investment in Freddie Mac in 1988. At the end of 1999, Omaha, Nebraska-based Berkshire owned an 8.6 percent common equity stake with a market value of $2.8 billion. Buffett sold most of the holding the next year, and also reduced a smaller position in Fannie Mae, according to his 2000 annual report. He later said that he was wary of goals the companies set to boost results.

“Any time a large financial institution starts promising regular earnings increases, you’re going to have trouble,” Buffett said in a 2010 interview with the Financial Crisis Inquiry Commission.

Berkadia Commercial Mortgage LLC, a venture between Buffett’s company and Leucadia National Corp., originates apartment loans backed by Fannie Mae and Freddie Mac. Berkshire also makes loans to customers who buy manufactured homes.

Paint, Carpet

Buffett’s company has units that benefit from an improving real estate market, including Clayton, which builds manufactured houses; paint-maker Benjamin Moore; and carpet-manufacturer Shaw Industries. The company has also been expanding its home- brokerage franchise under the Berkshire Hathaway HomeServices brand.

In the interview with Liu, Buffett dismissed speculation that he’s interested in taking a stake in Major League Baseball’s Chicago Cubs. He said he hadn’t talked with the Ricketts family, which owns the team, about a deal.

“There’s no reason to do it,” Buffett said. “I would get no big ego kick out of it, or anything of the sort.”

--With assistance from Noah Buhayar in New York and Clea Benson and Romaine Bostick in Washington.