When Everyone Else is Bailing, the Pros like Buffett are Buying!

As things seem to grow more dire, and housing prices are dropping like a stone, credit is tightening up, job losses are mounting and everyone is bailing from the market, what is billionaire Warren Buffett doing?

Well, Mr. Buffett and his company Berkshire Hathaway (NYSE: BRK) happen to be sinking $5 billion into Goldman Sachs Group, Inc. (NYSE: GS). Says Mr. Buffett, "I am betting on the Congress doing the right thing for the American public and passing this bill,” Buffett said on cable channel CNBC. "I certainly have a vote of confidence in Goldman and a vote of confidence in Congress.”

Yesterday, the markets seemed to be glued to the TV as Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson pressed their case before Congress for this proposed $700 billion bank rescue plan.

In testimony to the Joint Economic Committee, Bernanke repeated his warning of dire economic consequences if the bailout isn’t enacted and if credit woes persist. Neither businesses nor consumers would be able to borrow money, he said, adding that such a scenario could result in the world’s largest economy grinding to a virtual halt.

Mr. Buffet endorsed the bailout plan. According to Mr. Buffett, "I think the Treasury will pay back the $700 billion and make a considerable amount of money,” Buffett said, adding that if he had $700 billion on the government’s terms to buy distressed assets, he would. For now, this Goldman Sachs investment is the next best thing and it seems to be a shrewd and potentially very lucrative business deal for Birkshire Hathaway.

Goldman rose $4.48, or 3.58 percent, to $129.53 in New York Stock Exchange composite trading on Wednesday. The deal is for perpetual preferred stock with a 10 percent yield, and Birkshire is also getting warrants to buy $5 billion in Goldman common shares in the next five years at $115 a share. Not too shabby!