Legendary investor Warren Buffett reckons the US government can make a sizeable profit if it manages its $700bn (£380bn) banking bail-out package carefully - and he urged Congress to act quickly to avert an "economic Pearl Harbour".

Having been uncharacteristically quiet through much of the financial crisis, the "Sage of Omaha" broke cover late on Tuesday by investing $5bn in Goldman Sachs, delivering a powerful shot in the arm to the sickly banking industry.

The Nebraska billionaire, whose fortune was estimated at $62bn before the recent financial turmoil, threw his weight wholeheartedly behind Henry Paulson's rescue package for Wall Street, arguing that US industry would "grind to a halt" without action.

"Last week, we were at the brink of something that would have made anything that's happened in financial history pale," he told CNBC television. "I'm not saying the Paulson plan will eliminate the problems but it's absolutely necessary, in my view, to avoid going off the precipice."

Buffett, whose opinions are hugely influential among millions of private investors in the US, said that if the treasury acted shrewdly by buying banks' distressed assets at a competitive price, taxpayers would end up financial winners.

"I bet they'll make a profit," said Buffett, who pointed out that hedge funds specialising in junk assets were already picking up mortgage-related securities with a view to making profits of 15% to 20%. He said a positive return was

feasible if the government ignored the book value of instruments or the original cost to banks and instead paid the prevailing market rates for the bombed-out assets.

"They'll pay back the $700bn and make a considerable amount of money if they approach it like that," said Buffett. "I would love to have $700bn at treasury rates to buy fixed-income securities - there's a lot of money to be made."

Buffett's $5bn investment in Goldman Sachs' preferred stock was matched by a further $5bn capital-raising yesterday as the bank took the opportunity to bolster its balance sheet. Goldman's shares, which fell as low as $86 last week, rose by 2% to $127.88 during early trading in New York.

It is the first time that Buffett's Berkshire Hathaway business empire has made a significant play in banking since an unhappy dalliance with Salomon Brothers during the late 1980s and early 1990s.

"The price was right, the people were right, the terms were right and I decided to write a cheque," said Buffett, adding that he had plenty of cash and was on the lookout for opportunities. "Otherwise, it's a bit like saving up sex for your old age - at some point you've got to use it."

A keen Democrat who is backing Barack Obama, he said he hoped Paulson would remain treasury secretary irrespective of the election outcome. Urging Congress to act swiftly, Buffett said Wall Street's troubles were inseparable from the finances of US consumers. "The economy is a bit like a bath tub - you can't have cold water at the front and hot water at the back," he said.

"This is sort of an economic Pearl Harbour we're going through. I think most of [Congress] will get it and they'll do what's right for the country."