Charles Munger, the billionaire vice chairman of Berkshire Hathaway Inc., defended the U.S. financial-company rescues of 2008 and told students that people in economic distress should "suck it in and cope."
"You should thank God" for bank bailouts, Mr. Munger said in a discussion at the University of Michigan last Tuesday, according to a video posted on the Internet. "Now, if you talk about bailouts for everybody else, there comes a place where if you just start bailing out all the individuals instead of telling them to adapt, the culture dies."
Bank rescues allowed the nation to avoid what could have been an "awful" downturn and will help the country as it deals with the housing slump, Mr. Munger, 86, said. He used the example of post-World War I Germany to explain how the bailouts under Presidents George W. Bush and Barack Obama were "absolutely required to save your civilization."
"Hit the economy with enough misery and enough disruption, destroy the currency, and God knows what happens," Mr. Munger said. "So I think when you have troubles like that you shouldn't be [complaining] about a little bailout. You should have been thinking it should have been bigger."
When Germany was unable to stabilize its financial system in the 1920s, Mr. Munger said, "we ended up with Adolf Hitler."
Taxpayer funds injected into banks helped insulate bond investors from losses and cushioned stock declines for equity holders. U.S. programs designed to ease the burden for distressed mortgage holders didn't prevent foreclosures from rising to a record. One of every 381 households received a foreclosure filing in August, according to RealtyTrac Inc.
"Charlie Munger is misrepresenting history, and that's why the public is angry at Wall Street," said Joshua Rosner, an analyst at research firm Graham Fisher & Co. "We could have wiped out the equity holders before we wiped out the taxpayer."
Berkshire benefited from a recovery in earnings at some of its main bank holdings. It is the largest shareholder of Wells Fargo, the biggest U.S. home lender, with a stake valued at more than $8 billion. Berkshire also owns $5 billion of Goldman Sachs Group preferred stock.
Mr. Munger won a cult following among investors for his economic insights and a direct manner of delivering his views. "He's irascible, brilliant and doesn't suffer fools gladly," Berkshire investor Jeff Matthews of Ram Partners LP said.
Mr. Munger is welcomed by crowds of tens of thousands each year when he takes the stage with Berkshire chairman Warren Buffett, his longtime business partner, at the annual company meeting. Thousands have also turned up at the annual meeting of Wesco Financial Corp., a Berkshire unit where Mr. Munger is chairman.
At the Michigan event, one questioner said he had attended both Berkshire and Wesco meetings. "You mean the groupies have followed me here?" Mr. Munger asked.
To another who asked whether the government should have bailed out homeowners instead of Wall Street, Mr. Munger said, "You've got it exactly wrong."
"There's danger in just shoveling out money to people who say, 'My life is a little harder than it used to be,' " Mr. Munger said at the event, which was moderated by CNBC's Becky Quick. "At a certain place, you've got to say to the people, 'Suck it in and cope, buddy. Suck it in and cope.' "