UPDATE 1-Paulson, Buffett say US needed tough medicine

* Paulson: Merrill could have failed fast

* Buffett: More appreciation for steps taken in 2008

By Jonathan Stempel

NEW YORK, Feb 9 (BestGrowthStock) – Former U.S. Treasury Secretary
Henry Paulson and billionaire investor Warren Buffett, from
different sides of the political spectrum, expressed support on
Tuesday for the U.S. government’s aggressive steps in 2008 to
keep the nation’s banks and economy from a complete meltdown.

The men were speaking before the annual meeting of the
Greater Omaha Chamber of Commerce in Omaha, Nebraska, where
Buffett’s insurance and investment company Berkshire Hathaway
Inc (BRKa.N: )(BRKb.N: ) is based. CNBC simulcast their talk on its
website.

Paulson and many other regulators have been faulted for
letting Lehman Brothers Holdings Inc (LEHMQ.PK: ) go bankrupt on
Sept. 15, 2008, a signal event in the global financial crisis
and still by far the largest bankruptcy in U.S. history.

Yet Paulson, a former Goldman Sachs Group Inc (GS.N: ) chief
executive who became treasury secretary under Republican
President George W. Bush in 2006, called the credit crisis of
2008 “a doozy,” one whose scope he never foresaw.

He praised the still-controversial agreement by former Bank
of America Corp (BAC.N: ) Chief Executive Kenneth Lewis to buy
Merrill Lynch & Co, an accord announced roughly an hour before
Lehman went bankrupt.

That move still dogs Lewis, who retired from the bank six
weeks ago and was hit with a civil fraud lawsuit last week by
New York Attorney General Andrew Cuomo over his conduct in the
merger. Lewis’ lawyers have rejected the charges.

Merrill “wouldn’t have lasted a week” had Bank of America
not bought it, Paulson said. Lewis “was a confident, decisive
CEO,” and buying Merrill was “a stabilizing action” for the
financial system, he said.

Still, Paulson said Wall Street pay remains “out of whack”
and that the highest-paid workers should be compensated mainly
in equity, in a way that rewards long-term performance.

Last week, Goldman said Paulson’s successor Lloyd Blankfein
would get $9 million for 2009 in the form of a stock bonus.
That is below the $67.9 million he was awarded in 2007, when
Goldman also turned a record profit. Analysts believe the lower
sum could defuse some critics of pay on Wall Street and at
Goldman.

Buffett was interviewing Paulson about the latter’s new
book, “On the Brink: Inside the Race to Stop the Collapse of
the Global Financial System.”

Long supportive of Democratic causes, Buffett said the book
gave him a better understanding of how Bush and Paulson handled
the financial crisis.

“I really did gain an appreciation for the fact that he
understood what was going on and that he understood what needed
to be done,” Buffett said, referring to Bush.

He recalled Bush’s pithy summary of the crisis in late
September 2008, in which the president was quoted as saying:
“If money isn’t loosened up, this sucker could go down.”

Investing Analysis

(Reporting by Jonathan Stempel; editing by Andre Grenon)

UPDATE 1-Paulson, Buffett say US needed tough medicine