crisis is an economic

Warren Buffett said yesterday that the US economy had “fallen off a cliff”, describing the current crisis as “an economic Pearl Harbor” as concern spread about the US Administration’s fitful attempts to halt the collapse of the American banking sector.

The leading investor, an informal adviser to President Obama whose financial diagnoses are widely respected – even though he conceded that he failed to predict the severity of the crisis – said that the economy had come “close to the worst case” imagined, and that recovery would be slow.

Mr Buffett, a multibillionaire, said that the entire banking sector had been hours from collapse in September, and would have imploded without the $700 billion Wall Street emergency bailout.

Mr Buffett also spoke of the growing fears over Mr Obama’s muddled approach to the central issue in solving the economic crisis: what to do with the banks’ $2 trillion of toxic debt that is threatening the collapse of the financial sector. Mr Obama and his Treasury chief, Timothy Geithner, have said that they do not want to nationalise any banks but they are coming under increasing pressure after massive and repeated injections of cash into crippled financial giants such as Citigroup, Bank of America and AIG have failed to stem losses.

Mr Geithner, who is woefully understaffed at the Treasury Department, has yet to come up with a detailed plan to stabilise the financial sector. Mr Buffett told CNBC that there needed to be a “very, very clear message”, adding: “People are confused and scared. People can’t be worried about banks, and a lot of them are.”