Charlie Rose Warren Buffett Interview

8/8/2019 Charlie Rose Warren Buffett Interview

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Warren Buffett: I Haven't Seen As Much Economic Fear In My Adult Lifetime - Charlie Rose Interviewosted By: Alex Crippen | Executive Producer

| 01 Oct 2008 | 08:46 PM ET

n an interview tonight (Wednesday) w ith Charlie Rose on PBS, Warren Buffett says, "In my adult lifetime I don't thi've ever seen people as fearful, economically, as they are now... The economy is going to be getting worse for a while."

Bloomberg also reports Buffett tells Rose that the freezing of credit markets is "sucking blood" from the U.S. economy,which he compares to a heart attack victim "flat on the floor."

arlier today, in a telephone interview w ith CNBC following the announcement that Berkshire Hathaway is investing3 billion in General Electric , Buffett criticized Congress for not acting sooner on a financial rescue plan:

You've had an economy that's like a great athlete that's had a heart attack, cardiac arrest, and the paramedics that haome, (and are) arguing (about) who was at fault, the athlete should have been checking his blood pressure morearefully. The important thing is to apply the resuscitator. It doesn't help spending time worrying about who is to

blame for the patient having the heart attack."

Buffett told us he still thinks Congress will "do the right thing" but will "feel better after the votes have been counted." Hewarned that there will be "terrible, terrible" problems if Congress doesn't take action, sooner rather than later.

Here is a complete transcript of tonight's Warren Buffett interview w ith Charlie Rose, airing on PBS. It w asrovided to CNBC by theCharlie Rose program.

Charlie Rose:We are in San Diego, California this afternoon for a conversation with Warren Buffett. He is a man congressional leaders, dministration, and the Federal Reserve want to talk and talk to. He is the legendary chairman and CEO of Berkshire

Hathaway. Its success has made him the world's richest man. He's admired for his investment results over a long period me. He is trusted for his common sense and the fact that he's warned over the years, in his annual letter to stockholderbout some of the things that are contributing to the crisis facing America and the global economy. For all those reasons,ave come to see him in San Diego where he is attending the Fortune Magazine's most powerful women's summit. Later,

will be interviewed at a conference by the Fortune reporter and long time friend, Carol Loomis. We come this evening fromhe studios of our public television affiliate in San Diego, KPBS. I thank my friend, Warren Buffet, for taking time in a busy

chedule to talk to us.

Warren Buffett:My pleasure, Charlie.

Charlie Rose:et me talk of the news of today. You have announced an investment of $3 billion in General Electric, along the same terms the the Goldman Sachs --

Warren Buffett:Yeah, almost identical.

Charlie Rose:

Why GE?

Warren Buffett:Well, I got a call this morning from a friend of mine at Goldman Sachs saying they might be interested in such annvestment. I'm familiar with the company. I've known the management, the current management, Jack Welch before Jemmelt. I've known him for decades. And so I understand their businesses. We do lot of business with him, and GE haseen -- I think it's the longest running stock in the Dow Jones industrial average. It will be 100 years now it will be arounope I'm around then, too. And it was an attractive investment. And we have had a lot of money around, over the last twears, and we're seeing things that are attractive now.

Charlie Rose:Are you looking at other things?

Warren Buffett:

nbc.com


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look at everything, Charlie. That's my job. I really do. I mean every day, I think about everything, yeah.

Charlie Rose:know, but cash is said to be king now. Are you sitting on a lot of cash so that this is the time for Berkshire Hathaway an

Warren Buffet to look carefully at a lot of opportunities.

Warren Buffett:Yeah, we want to use cash. The reason we haven't used our cash two years ago, we just didn't find things that were thatttractive. But when people talk about cash being king, it's not king if it just sits there and never does anything. There ames when cash buys more than other times, and this is one of the other times when it buys a fair amount more, so we u

t.

Charlie Rose:There is a time to accumulate and a time to spend.

Warren Buffett:Absolutely. You want to be greedy when others are fearful. You want to be fearful when others are greedy. It's that simp

Charlie Rose:What are they now?

Warren Buffett:They're pretty fearful. In fact, in my adult lifetime, I don't think I've ever seen people as fearful economically as they areight now.

Charlie Rose:Why is that, do you think?

Warren Buffett:Well, it's because they -- they have seen the credit market seize up. They're worried about money market funds, althoughe latest proposition from government should take care of that. They've seen eight percent of the bank deposits in the

United States get moved very skillfully, I might say, within the last couple of weeks from institutions that they thought wene a few months ago to other institutions. They are not wrong to be worried.

Charlie Rose:s it being felt as people often point out on Main Street?

Warren Buffett:Well, I've read about all the sales today. If you're an auto dealer, you're feeling it. If you're a furniture retailer like we arou're feeling it. If you're a jewelry retailer, you're feeling it. I know some of these businesses because we're in them. Yt's being felt, but it will be felt big time more if we don't do something about it, what's going on.

Charlie Rose:The Senate will vote sometime this evening.

Warren Buffett:Right.

Charlie Rose:Are you satisfied with that rescue plan?

Warren Buffett:Well, I don't think it's perfect, but I don't know that I could draw one that's perfect. But I'd rather by approximately righthan precisely wrong, and it would be precisely wrong to turn it down. We need -- we have a terrific economy -- it's like areat athlete that's had a cardiac arrest. It's flat on the floor, and the paramedics have arrived. And they shouldn't arguebout whether they put the resuscitation equipment a quarter of an inch this way or a quarter of an inch this way, or theyhouldn't start criticizing the patient, because he didn't have a blood pressure test or something like that. They should do

what's needed right now. And I think they will. I think the Congress will do the right thing. I think that they've -- you knhey got into certain arguments and they start worrying about assessing blame, and there is a little demagoguery, but in tnd, something this important, they'll do the right thing. So this really is an economic Pearl Harbor. That sounds

melodramatic, but I've never used that phrase before. And this really is one.

Charlie Rose:

Go through why that is true beyond the fact that there is a freeze on credit, beyond the fact that nobody is making loans,


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eyond the fact that banks don't lend to backs beyond the fact that treasury bills are at a low.

Warren Buffett:Yeah. When 40 billion of treasury bills are sold like they were last week, seven day treasury bills, at a yield of 1/20th of oercent, that means the whole country is basically at the point virtually, or a lot of the country is at the point of putting the

money under the mattress. One twentieth of one percent away from where it's betting to put it under the mattress. Youon't want 300 million Americans putting their money under the mattress. This economy doesn't work well without theubrication of credit and trust. And that's been lost. It's a huge problem. What you have is you have the major institutionhe world all wanting to deleverage. They want to take down their assets and liabilities. What seemed so easy to borrowgainst a year ago now looks like rat poison to them. So they're trying to deleverage. There is only one institution in the

world that can leverage up in a way that's all a countervailing force to that, and that's the United States Treasury.

Charlie Rose:Are you approving of what has been taking place along the stages that got us to where we are now, whether it's Bear Stear Lehman Brothers or AIG, Freddie Mac and Fannie, or what you've done with Goldman Sachs and the rest?

Warren Buffett:Yeah, I think basically the right things have been done. But no one saw the tsunami coming fully. And so when Bear Steaame along, it looked like if you stopped the flood at that point, you didn't have to worry about being downstream from it.

And I think the Fed did the right thing there. And I really thought that would probably halt runs on other major institutionut it didn't. We have seen wave after wave. And admittedly, there's been somewhat of an ad hoc response. I'd rather hn ad hoc response than no response at all. And I don't think -- I don't think the treasury could remotely have gone to

Congress three or four months ago and laid out that scenario of what's happened and been credible and gotten the necessools. I think it took a crisis like this --

Charlie Rose:And asking for the power he is asking for and the level that he was asking for.

Warren Buffett:No, they wouldn't have gotten it. So I think it's been, you know, kind of like a tragic play to this point. But at this point, Ihink it's clear, and will be clear to the majority of the Congress. I think it's clear to the American people that there is onlyne countervailing force to a world where financial institutions are trying to sell instruments every day and where credit haried up, and that's the United States Treasury.

Charlie Rose:But at the same time, there has been, and Congressmen and women will tell you this, a resistance across the country bechey think, as you well know, it's a bailout of Wall Street and that they are sitting there in their own economic life, andobody's coming along to say, We're here to help you. We're from the government.

Warren Buffett:Well, the patient that's on the floor with the cardiac arrest is not Wall Street. It's the American economy. I mean, that's -

Charlie Rose:Do you think they understand that yet? Because that's --talking simultaneously]

Charlie Rose:- communication.

Warren Buffett:Yeah. I think they probably don't. And I think any time you couple the term "Wall Street" with "bailout" or something like

hat, you know -- I don't like what's going on in Wall Street. I don't like what's going on with the executive compensationYou know, but I don't want to give a lecture to this body that's out there. You know, I mean, having had the heart attackwant to get it back functioning. And as a practical matter, I mean if you were Bear Stearns, and you were a shareholder, now, you lost 90 to 95 percent of your money. A good many lost their jobs. They lost very cushy lives, many of them.

Charlie Rose:Right.

Warren Buffett:f you were at Lehman, the same thing happened. If you were at AIG, the shareholders are getting creamed on these thin

And those shareholders are not just a bunch of big shots in Wall Street. Those are pension funds, and those are investorsver the country. I wouldn't worry too much about that. Justice won't be perfect on it. I mean, you may be very mad atome guy that walked away with a huge golden parachute, but that really isn't the important thing. I mean, if Pearl Harbo

ame along, you could have said the planning was wrong by the military ahead of time or maybe the battleships shouldn't


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ave all been in the harbor and all that kind of thing.

Charlie Rose:Right.

Warren Buffett:t doesn't make any difference.

Charlie Rose:t's Pearl Harbor. [unintelligible]

Warren Buffett:mean, the job is Pearl Harbor. And you better not spends weeks and weeks and weeks trying to assign blame or decidin complete plan for fighting the whole war, you know, and letting a committee decide where the battleships should go andf that. You better spring into action with the best people you have.

Charlie Rose:You have never seen anything like this in your life.

Warren Buffett:No, I haven't.

Charlie Rose:There are those who argue that we are headed for a recession, you know? And they look at depression as the great fear.

Warren Buffett:Sure.

Charlie Rose:s that a possibility if this plan doesn't work?

Warren Buffett:Yeah, it's a possibility, yeah. We have about 6.1 percent unemployment now. I mean, we've been in a recession, by anyommon sense definition, because if you look at the American public, they've got 20 billion -- 20 trillion, I should say, wortf residential homes. They've got 20 trillion worth of stocks, very roughly. Those are the two big assets of Americanamilies. They are both down dramatically for different families. But 95 percent of the people at least are worse off in terf their residential wealth plus stock wealth from a year ago or two years ago. That is bleeding into the real economy. I

mean, that's bleeding into auto sales and jewelry sales and furniture sales and all that. But that wave is just starting to hAnd if the paralysis we have in the credit markets, if every company continues to feel all we want to do is get our balanceheet down, sell assets, you know, it's just the start of what can happen. Unemployment's going to go up under anyircumstances. I mean, it's the 6.1 is going to go higher. But whether it goes and quits at 7 or whether it quits as 10 or 1r 12 depends on, among other things, the wisdom of Congress, and then the wisdom of, in terms of carrying out the planhat Congress authorizes.

Charlie Rose:Would you say that this plan which you have argued very strongly the Senate ought to pass and the House ought to pass iimply the plan that we have, and I don't have a better idea. But it's essential for the confidence of the nation and theystem?

Warren Buffett:

Yeah. I just worry about whether it's enough. But I think it is --

Charlie Rose:nough what?

Warren Buffett:very day that goes by, I mean, if you don't react to Pearl Harbor for a week or two weeks or three weeks, you're behind ihe war that you otherwise would have fought. But it's very important that the determination of the US Congress to do ws is needed be made evident this week and by the actions of most of the members. I mean, you're not going to get totalssent.

Charlie Rose:What makes you confident that this plan will work? I mean --


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Warren Buffett:Well, I think you've got -- I don't think you can have a better secretary of the Treasury than Hank Paulson, you know. Imean, he is in there at the wrong time, probably shouldnt have taken the job. Hes a friend of mine. But he knows marke knows corporations work, he knows money, and hes got the interests of the country at heart. And so, youve got theight -- youve got a wonderful person with Sheila Bair, most of the viewers have never heard of Sheila Bair. Sheila Bair, inhe last two weeks, has taken eight percent of the deposits in the United States and seamlessly moved those over to sounnstitutions which in turn have gotten more capital, ended up, its been a magnificent job. Eight percent of the deposits inUnited States, 10s of millions of depositors. And nobodys ever heard of her. Shell never get a golden parachute or anyeverance pay or anything. Shes done a great job. Weve got some great public servants. We have I think the right peon there to get the job done, and then they need more tools.

Charlie Rose:

And those more tools might be in addition to whats in this plan?

Warren Buffett:

Well, they need plenty of money and they really need plenty of flexibility to carry out this plan. They also need in my viewery much tie it to market prices. I have said, Charlie, that the 700 billion, if they buy mortgage-related securities or

mortgages themselves at current market prices, theyre going to make money over time because the United Statesovernment has staying power and it has a low cost of borrowing. And if I could take one percent of that 700 billion pot aake the gain or loss from it and be their partner, and they would buy the stuff at market, I'd make a lot of money. Its --

mean you have hedge funds and people like that buying these assets to yield 15 or 20 percent, I mean, thats the buyer fohese people that are trying to unload them. The U.S. Treasury has got borrowing costs like nobody else has. They canorrow basically unlimited amounts. They can stay there for years and years. These assets will be worth more money ovme. So when Merrill Lynch sells a bunch of mortgage-related assets at 22 cents on the dollar like they did a month or sogo, the buyer goes -- is going to make money, and hes going to make a lot more money if it happens to be an institutionke the U.S. government which has very, very cheap borrowing costs.

Charlie Rose:

So you are saying to those taxpayers who are worried about whats going to happen to the $700 billion, chances are goodhat when these securities are purchased and sold, youll get a lot of your money back.

Warren Buffett:

think [inaudible].

Charlie Rose:

Or all of your money back, and maybe something else [spelled phonetically].

Warren Buffett:

would bet on it. I mean, if I got a chance to take one percent of the deal either way, I would make that bet. WhenBerkshire Hathaway laid out three billion dollars for GE today, we didnt spend it, we invested it. When the Federalovernment buys the mortgages, theyre not spending it, theyre investing it. Now, theyre investing it in distress type asut theyre buying them at distress prices if they buy them at market. Its the kind of stuff I love to do. I just dont have

million. Maybe we could go in it together.

laughter]

You know, with your money and my brains, I mean, theres no telling how far wed go.

Charlie Rose:

Whatever, Ill take the deal, whatever you want to do. There is this, though, I mean, in terms of alternatives, some peoplave suggested for example that why dont we -- why isnt America doing what Berkshire Hathaway is doing? Why isnt th better deal for America?

Warren Buffett:

dont think it would be crazy to have a model or an entity model on the Reconstruction Finance Corp. That goes back to


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932, although it was really implemented in 33 under Jesse Jones, and it invested in mostly banks initially and preferredtock and that sort of thing. So there are two things needed in the system, the one thats needed overwhelmingly isquidity. I mean, when people are trying to [unintelligible], there has to be somebody there to buy. And they dont haveuy at a fancy prices, but to buy. And then theres also a capital problem with some of the institutions. We have providedapital here with a couple of institutions recently. The Federal government did that in the 30s for the RFC and I think theould well be a proper role for government in that.

Charlie Rose:

Would that have been a better idea today?

Warren Buffett:

t wouldnt have been big enough today. And it wouldnt have been -- you couldnt have -- if youd set up at RFC today anou gave them $100 billion invested in the [spelled phonetically] capital, thered be a very cumbersome type of applicationrocess and everything, these assets are getting shoved out day by day, and loans are coming to a commercial papers noteing renewed. I mean, the commercial paper market, when that dries up, you know, thats just like sucking the blood ouhe economic body of the United States. And thats happening. So I would say that an RFC-like thing might make sense. robably would do it myself. But I dont think trying to combine that with whats going through now, I think what is needeow is liquidity.

Charlie Rose:

All right. There are those who -- you just said you would do it yourself -- there are those who believe and it has been

uggested, you know, that this is the time for Warren Buffett to answer the call of his government in a country thats beenery good to him. I mean what are you prepared to do yourself beyond run Berkshire Hathaway well is this.

Warren Buffett:That's my job. But any time I can be of help to the government in terms of giving advice -- I've given a little advice,ctually. [talking simultaneously] anyway, no. I obviously am willing to do that. I'm here tonight talking about this for theason. It isn't going to do anything for Berkshire Hathaway. Well, that isn't really true. I mean anything that enables thconomy to run in the manner that it should -- I mean we've got the same clients out there we had two years ago. We hahe houses, we've got people -- more productive than they've ever been in the history of this country. We've got a wondeconomic formula in this country, but right now, it is being -- it's been brought to a halt by some events --

Charlie Rose:By?

Warren Buffett:Well, it's the deleveraging that's going on right now that has caused the credit crisis.

Charlie Rose:mentioned earlier in this introduction do you, if you read your letters to your stockholders which you write, and Carol Loodits every year, and you think of your sister as the person [talking simultaneously]

Warren Buffett:Two sisters, yeah.

Charlie Rose:You have talked about derivatives. Derivatives are, in part, at the core of this problem, yes?

Warren Buffett:AIG would be doing fine today. It was one of the ten largest companies in the United States in terms of market value, ove00 billion, the most respected insurer and everything in the world. If they never heard of the word derivatives, they'd beoing fine. They'd be going to work in the morning and they would have no troubles. But they -- they -- it was very easyo, because it's very tempting to write numbers on little pieces of paper and you can report the profit you want to, and thes no limit on it. I mean there is no capital requirements to it or anything of the sort. And basically, I said there were posnancial weapons of mass destruction, and they had them. They destroyed AIG. They certainly contributed to theestruction of Bear Sterns and Lehman. Although Lehman had other problems, too.

Charlie Rose:'m interested in this because people are asking, did people get away with murder here? Were there people who simplyained the system and took advantage and made huge amounts of profit, and we had accesses that inevitably led to wher

we are today?


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Warren Buffett:Well, we had all of that. But I would say the biggest single cause was we had an incredible residential real estate bubble. mean you can go back to tulip bulbs in Holland 400 years ago. The human beings going through combinations of fear andreed and all of that sort of thing, their behavior can lead to bubbles. And it may have had and Internet bubble at one timou've had a farm bubble, farmland bubble in the Midwest which resulted in all kinds of tragedy in the early '80s. But 300

million Americans, their lending institutions, their government, their media, all believed that house prices were going to goonsistently. And that got billed into a $20 trillion residential home market. Lending was done based on it, and everybodid a lot of foolish things. And people really behaved in a fraudulent way or something, we'll go back and find the culpritsater on. But that really isn't the problem we have. I mean that's where it came from, though. We leveraged up and if yoave a 20 percent fall in value of a $20 trillion asset, that's $4 trillion. And when $4 trillion lands -- losses land in the wroart of this economy, it can gum up the whole place.

Charlie Rose:And it continues with respect to the housing market.

Warren Buffett:t continues.

Charlie Rose:And some will argue that we have to do something about that in terms of a long-term recovery of the American economy.

Warren Buffett:Well, there is no question we have an access stock. The good thing is, we have household formation in this country. We

country where I don't know whether it's a million households a year or more, but good form. So we can eat off anunintelligible], but too big, and house prices just soared beyond -- beyond reason in many places and they got financed inilly ways, and people lied about loans, all kinds of accesses entered into it. But that is what -- that is the single biggestause of why we're here.

Charlie Rose:And should wise people have known better?

Warren Buffett:eople should always know better.

Charlie Rose:Yeah.

Warren Buffett:mean people -- people don't get -- they don't get smarter about things that get as basic as greed and you can't stand to our neighbor getting rich. You know you're smarter than he is, and he's doing these things, you know, and he's getting rnd your spouse is getting unhappy with you because you aren't doing -- pretty soon you start doing it. And so you get wcall the natural progression, the three Is. The innovators, the imitators, and the idiots. And that's what happens.verybody just kind of goes along. And you look kind of silly if you disagree. I mean, you know, you could have these cranternet valuations in the late 1990s, but they prove themselves out in the market. The next day they were selling for mohan they were the day before, and people said, you know, you're crazy if you don't get in on this. So it's very human. N

with housing it's something even more dramatic than that, because most people aspire to own their own home. And if youeally think that houses prices are going to go up next year and the year after, you feel if I don't buy it this year, I'm goingave to buy it next year. That's not true of an Internet stock. But it's true of a home. And when somebody makes it veryasy for you to do it by saying you don't really have to put up my money, you can lie about your income a little, or we'll giou 100 percent mortgage, you're going to do it, because everybody that's done it has been proven right. You have what

hey call social tools, and, you know, you're going to feel like an idiot if you didn't do it, because the house cost more.

Charlie Rose:t's sound money.

Warren Buffett:t's sound money, sure.

Charlie Rose:And so when you look at where we are going, there seems to be two issues that are apparent to me at least, risk andeverage. We just lost sight of risk and leverage of what was appropriate?

Warren Buffett:Yeah. Again, because it pays off for a while. You know, you can lose leverage, and it's the only way a smart guy can goroke. If you owe money, you can't pay them out. You just pay for everything, you do smart things, you eventually get v


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ich. If you do smart things and use leverage and do one wrong thing along the way, it could wipe you out, because anythmes zero is zero. But it's reinforcing when the people around you are doing it successfully, you're doing it successfully, a

t's a lot like Cinderella at the ball. I mean you know at midnight everything is going to turn to pumpkins and mice; right?But if the evening goes along, I mean, you know, the guys look better all the time, the music sounds better, it's more andmore fun, you think why the hell should I leave at quarter of 12. I'll leave at two minutes to 12. But the trouble is, there o clocks on the wall. And everybody thinks they're going to leave at two minutes to 12.

Charlie Rose:And you're having a good time.

Warren Buffett:Yeah, sure.

Charlie Rose:So if this plan -- you hope it will do what? It will loosen credit. It will stop the slide and the panic. People will have moreonfidence --

Warren Buffett:Confidence is key. Confidence is key. You're not going to leave your money with me unless you're confident I'm going toive it back to you. And at this point, when treasury bills, seven day treasury bills at 1/20th of one percent, it's not becaueople want to earn 1/20th of one percent, it's because they trust the fact the treasury will give it back to them next week

And I'm sitting with six and a half billion dollars we're going to use to close the Mars-Wrigley deal on October 6. I've got tand over that six and a half billion on October 6. Now, I have to be very careful about who I leave it in between now andhen, because they're expecting that he show up. But I lose confidence in other people, all kinds of institutions. And therre plenty of them that I've lost confidence in. Then they get -- their funds aren't available. They don't have it for the ne

mean the whole economy just comes to a grinding halt. Competence in markets and in institutions, it's a lot like oxygenWhen you have it, you don't even think about it. Indispensable. You can go years without thinking about it. When it's goor five minutes, it's the only thing you think about. And the oxygen has been sucked out of the credit markets, andonfidence, and there has to be -- it'

And that's what this --

Warren Buffett:That's what I hope gets done.

Charlie Rose:And if it doesn't work?

Warren Buffett:You turn the spigot. But you -- I've argued with the senators and congressmen I've talked to. You don't want to be too lioo late. They're being somewhat too late, in my view, and -- but that's okay. We're going to argue for a few weeks afterearl Harbor to decide whether the Japanese attacked or whether we should actually commit a few battle ships. But the tttle part, you know, it could be a mistake. I mean this has to be done on a --

Charlie Rose:Too little meaning in terms of dramatic steps, or the amount of money you're spending --

Warren Buffett:t's whether people think it's too little, when you get all through with it. I mean in the end, 700 billion is a lot of money. At will buy a lot of distressed property. And if you buy them at the right price, you may be buying two trillion of face valueThe one thing you don't want to do -- [unintelligible] paid for it what you're paying it from or what his carrying value is, yoot to buy it at market. And one way to do that is if some institution wants to sell you a billion dollars worth of mortgageshey might have to sell 100 million in the market, and then you'll buy the other 900 million on the same terms. Now, the act that this has been authorized or will be authorized, I hope, will firm up the market to some degree. And that's fine. Bou don't want to have artificial prices being paid.

Charlie Rose:What do you believe might never be the same?

Warren Buffett:Oh, I think confidence will come back. I will tell you this. This country is going -- be living better ten years from now thans now. It will be living better in 20 years from now than ten years from now. The ingredients that made this country, yonow, the miracle of the world -- I mean we had a seven for one improvement in the average American standard of living he 20th century. Now, we had the great depression, we had two world wars, we had the flu epidemic. You know, we hadhock. You know, we had all these terrible things happen. But something about the American system unleashed more an potential to human beings over that hundred years so that we had a seven for one improvement in -- there's never beenny -- I mean, you have centuries where if you've got a 1 percent improvement, then it's something. So we've got a greaystem. And we've got more productive capacity now than we ever have. The American worker is more productive than


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ver been. We've got more people to do it. We've got all the ingredients for a sensational future. It's just that right nowthlete's on the floor. But we -- this is a super athlete.

Charlie Rose:And what's the impact of the athlete being on the floor around the globe?

Warren Buffett:lenty. Plenty, and we're finding that out. And the same things happen to quite an extent around the globe. I mean, theuropean banks were doing what the American banks were.

Charlie Rose:And they're failing now, too.

Warren Buffett:Yeah. I mean, they were getting the mortgage of some guy in Omaha, you know, securitized a couple of times. I mean had all these -- they had all these types from Wall Street, you know, and they had advanced degrees, and they look verylert, and they came with these -- they came with these things that said gamma and alpha and sigma and all that. And aan say is beware of geeks, you know, bearing formulas. They've heard that in Europe.

Charlie Rose:Have we learned something about decoupling or the American economy in terms of its impact, for example, China, a placewhere you've had investments, and you know well.

Warren Buffett:Yeah. We just made a new one a couple days ago.

Charlie Rose:Where was that?

Warren Buffett:n a company called BYD, and they develop a really good electric car, I hope.

Charlie Rose:s there an operative narrative to the kinds of investments you are making other than you look at and you buy on value, lot advantagement [spelled phonetically] you look at a place that can absorbed the amount of money you want to invest, aou look at its prospects, and you look at price.

Warren Buffett:

Yeah. They have to be pretty good size for us now to have -- to move the needle. But we look for fairly large situations. ook for things I can understand. A lot of businesses I don't understand. So some guy may know how to make money inocoa beans, but I don't so I just let him have that. But it's got to be something I understand. It's got to be a business wundamentally good economics. It's got to be a management that I like and trust and admire. And it's got to be a price tmakes sense. And lately the price --

Charlie Rose:rices make sense.

Warren Buffett:rices make a lot more sense now, yeah.

Charlie Rose:

Now, is it --

Warren Buffett:And I'm not worried they're all about the investments we make. I mean, listen, this country -- we've got $46,000 or $47,f GDP per capita. Now, we've done pretty darn well. We'll do better in the future. I am not worried about the country. ust worried about anything that gums up the potential of the country. And right now, it's pretty gummed up.

Charlie Rose:Okay. But we do this emergency, urgent rescue.


Charlie Rose:


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Come January, we have a new president. We have a new treasury secretary.


Charlie Rose:We have a new legislature. What's there in parity? What will be the challenge for them because they then can take a littlf a longer term, look, maybe the patient's getting up off the ground. And but you want to get him or her moving faster.

Warren Buffett:Yeah. Well, I think it will get moving faster. I mean once you get it off the -- once credit flows -- now the recession is go

o get worse. I mean, I don't want to hold out false hopes that the -- by some magic moment, that things will turn around couple months because they wouldn't, Charlie. I mean, and it's a big mistake to try and mislead people. They will turnround. I don't know whether it will be six months or whether it'll be two years.

Charlie Rose:t's more likely two years than six months.

Warren Buffett:don't know. It isn't going to be one month or to months, no matter what happens. All I can --

Charlie Rose:Can you imagine six months from now, it's beginning to turn around? With the condition that you know their --

Warren Buffett:That's sort of the best case, yeah. That's sort of the best case.

Charlie Rose:And the worst case?

Warren Buffett:Worst case is a long time. And I would say that if they --

Charlie Rose:Worst case is five years or --

Warren Buffett:f we don't do the things we should do, it could be five years, sure.

Charlie Rose:Okay. We should do, though, beyond where we are now. What are those things?

Warren Buffett:Well, I would say this, if it becomes evident that -- I understand the latest bill, they're talking about 350 billion early and toing back.

Charlie Rose:Right, right.

Warren Buffett:But we need to throw the resources at this that are necessary. But like I say, we are not spending money. I mean, if we hese assets intelligently, the United States Treasury will make money. I mean, it's borrowing money. It's just a few perc year. And these assets are better than that.

Charlie Rose:Okay. But that's a very big if.

Warren Buffett:And it makes a difference who the treasury secretary is.

Charlie Rose:Okay. So that's the important question in terms of whether we buy these assets wisely.


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Warren Buffett:would say it's more important who the treasury secretary is than who the vice president is. If you want to have a debateere, I'd like a debate between potential treasury secretaries than the vice presidential debate.

Charlie Rose:Well, might it be a good thing for the presidential candidates to tell it who it is they're going to be listening to and who mige a potential treasury secretary?

Warren Buffett:Well, presidential candidates which I know listen to you.

Charlie Rose:That's because they tell you that, aren't they?

Warren Buffett:Well, no, but I mean it's not their job to know the candidacy of people.

Charlie Rose:

When all these people call you up, what are they asking you? I mean, youre hearing from your friends and people at theed, youve been through this before too I mean you were that long term capital , a lot of other times you have had to facifficult crisis.

Warren Buffett:

ve seen a lot of things happen.

Charlie Rose:

So they come to you and they say Youve fought wars before, Warren, wed like to talk to you. But whats the questionheyre asking? What is it they want to know? And Im talking about smart people who are charged with fixing it.

Warren Buffett:

Yeah. Well, lately theyve been asking will this work.

Charlie Rose:

Right. Yeah.

Warren Buffett:

And youre assuring them that if they do it --

Charlie Rose:

will.

Warren Buffett:

- if they do it, I -- I [talking simultaneously] Treasury Secretary [unintelligible] I would say this, I would -- they hate thiserm in Washington, obviously, but I would hand something pretty close to a blank check to a fellow like Hank Paulson to f-

Charlie Rose:

Would you, really?

Warren Buffett:

Yeah. Well --


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talking simultaneously]

Charlie Rose:

A blank check, $700 billion, go spend it?

Warren Buffett:

Yeah, go invest it. Go invest it. And maybe put up a little of your own money up beside it, I mean, I might ask Hank to gnvest with me.

laughter]

Charlie Rose:

Thats right.

Warren Buffett:

But, no I think that trying to invest through 535 people is a tough job, you know, and so I would give more latitude. Thatsnt going to happen and I -- you know, I [inaudible] --

Charlie Rose:

- go with oversight? I mean, thats what [inaudible], go with oversight.

Warren Buffett:

inaudible], I think --

Charlie Rose:

But dont try to make the decision --


Warren Buffett:

No, I think the oversight is great, and I think that oversight ought to be devoted almost entirely to the question is this beinone at market you know. In other words, you want to make sure that the government isnt investing foolishly. But youont want to care about which congressional districts it goes to or whether banks get favored over --

Charlie Rose:

But how do we determine whether its being done wisely?

Warren Buffett:

Well, I think --

Charlie Rose:

Thats a big question.

Warren Buffett:

Yeah, I think youll have plenty of scrutiny as how the moneys invested. I mean, just like the RFC. When the RFC operateople knew which institutions they were buying preferred stock in. And it worked very well.

Charlie Rose:


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But is this different from the Resolution Trust Company because they are talking about securities, not real estate?

Warren Buffett:

Yeah, well Resolution Trust Company was set up to liquidate a bunch of assets that the government had inherited becauseavings and loans went broke. So the savings and loans went broke, the government stepped in, paid off depositors, and heyre left with this mass of assets to sell. Were not talking about selling here, were talking about buying intelligently.

They were selling what they got handed to them by a bunch of savings and loan operators that had in many cases had donome very dumb thing. But their job was to liquidate it. And they liquidated. This is an entirely different proposition.

Charlie Rose:

You have said to me before that capitalism is not a perfect system. It may be better than all the other systems, but its nerfect system. You talked about it in terms of some of its failings. People are looking at this now and saying, you know,xcesses of capitalism, number one, markets that dont work. And theres some people in certain countries are pointing anger at us and saying, See, we told you, the markets will not always deliver for you.

Warren Buffett:

Markets arent -- people do, as long as you have markets, youll have excesses. People went crazy with tulip bulbs. Theywent crazy with the South Sea Bubble, they went crazy internet stocks, they went crazy with the uranium stocks back whewas first getting started. I mean, you know, youre not going to change the human animal. And the human animal reallyoesnt get a lot smarter. Now, you can you know you can have institutions that put curbs on that in various ways, andctually what the banks, you know, they have various capital ratios and that sort of thing, but the banks got around them,

mean, they set up sieves and that sort of thing just to get more leverage. People love leverage when its working. I meats so easy to borrow money from a guy at X and put it out at X [inaudible].


Charlie Rose:

- going up, youre --

Warren Buffett:

Yeah, but you dont get the X plus one back, if you still have the X on the other side youre in trouble.

Charlie Rose:

There is this, too, accounting. You have strong feelings about accounting and mark [spelled phonetically] to market. Tell where you are on that issue.

Warren Buffett:

A lot of people disagree with me on this, I believe in mark to market. I think that accounting in 1974 Charlie, it was eithe974 or 75, we owned a bunch of common stocks at Berkshire Hathaway. I told our shareholders what the market was.

we used that. I said I think these things are worth a lot more than market. And I think were going to make a lot of monut of it. But this is what theyre worth today. And I don't think anybody gets hurt by telling the truth on that sort of thin

And I think that once you start saying were going to peg these things at some price that isnt market, God knows what a

nancial [talking simultaneously].

Charlie Rose:

inaudible] these people make that argue against you will say the assets are worth much more than mark to market says herefore --

Warren Buffett:

Theyre not worth it today.

Charlie Rose:


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- therefore were not seeing a reality.

Warren Buffett:

Well, but that is the reality. And thats the reality of what theyre going to sell them to the Treasury for. You know, I --

Charlie Rose:

You get market.

Warren Buffett:

You get in a lot of trouble when you start putting fictitious numbers --

Charlie Rose:

On value.

Warren Buffett:

- on value. I mean, you can explain the fact that these are depressed prices, you know. We think these assets are goinge worth a lot more. And I think that case can be made in certain situations. But I think to just say, you know, we're goio say a dollar of cash is worth $2 all of a sudden, it isn't worth $2. It's worth a dollar today. And I think once you start

utting phony figures into financial statements, you get in a lot of trouble. And we've seen so much of that in the last 20ears.

Charlie Rose:s it getting worse?

Warren Buffett:don't think it's getting worse. I think people -- what people want to do is make it get worse. [laughter]

Charlie Rose:But what would you reform about that in terms of the way the accounting process -- you'd keep mark to market?

Warren Buffett:The rule [unintelligible]. I mean it's -- it's a nightmare to administer some of this sort of thing, but I want to tell thehareholders of Berkshire, to the percent we own marketable securities or things for which there are market, even if those

markets -- I want to tell them what it's all about. As a matter of fact, I've already written a section in the annual report foext year explaining why I think in one case that the figures on our balance sheet as calculated are wrong. But it's thetandard way of doing it. It's holy writ. The SEC wants us to do it that way, and we'll do it that way, and I'll explain why hink it's wrong and shareholders can read it and see whether they agree with my logic or don't.

Charlie Rose:You -- when you look at the prospects for this country, there are other people who argue, you know, that America, as goodt is, lives in a world today and there are books being written in which our supremacy, our primacy will now have to behared. That we may still own as much of the pie as we had, but other people will own a lot more.

Warren Buffett:

That's great. You know, I want our -- I want our pie to grow all the people, but if some other guy's pie is growing a littleaster, that's terrific. It will be good for us in the long run, and I mean there are, you know, six and a half billion people inhis world. And it's great for 300 million to keep enjoying more and more property, but I think it's terrific if, you know, themainder do. And I think if they can learn something from us in terms of our system, and I think they have, they areearning more about how to unleash the potential of their citizenry to turn out more goods and services that their citizenswant or that we want, I think that's terrific. And that's -- you know, I think it's much better to live in the world where thoround you, particularly when some of them have nuclear bombs, I think it's much better to live in a world where their livere getting better also.

Charlie Rose:Yeah. But you mean you look at that. So when you look at China today, and you look at some Asian countries and themount of American debt they have, how much does that concern you in today's economic circumstances? And are theyosing some of their confidence in America? And does that pose a huge problem for us?


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Warren Buffett:Well, somebody's buying these treasury bills at 1/20th of one percent. I mean the -- we -- [talking simultaneously]onsuming about $2 billion a day of goods and services beyond what we're producing. In other words, the rest of the worends about $2 billion a day net of something. We got to send them something in return, don't we. So we send them littlieces of paper. That would be nice if they stuck them all under a mattress, but they got to buy something with them.

Sometimes they buy a treasury note, sometimes they set up sovereign wealth funds. They can do all kinds of things. Thean buy our companies here. As long as we consume more than we produce, and we trade away little pieces of the countaily, they're going to own something. Now, they can't run from American assets. I mean every day the rest of the worldoing to have about two billion more of American assets than we have, as long as they sell us these goods.

Charlie Rose:Because we're borrowing two million dollars --

Warren Buffett:Yeah, and they want to sell us these goods.

Charlie Rose:But you don't believe that's good. I mean you believe that an increasing current accounts deficit is bad.

Warren Buffett:think it's bad.

Charlie Rose:And it reflects American's consumption ideas rather than its savings ideas.

Warren Buffett:Yeah.

Charlie Rose:But how does that change?

Warren Buffett:Well, I laid out -- it's kind of a Rube Goldberg plan a few years ago, which I don't like myself, except I like it better than thlternative, which is what we're doing. But we've actually been pretty good on exports. I mean we are exporting 12% of

GDP now roughly. That was five percent many years ago, a much smaller GDP. So the rest of the world really likes our stretty well. It's just we buy so damn much of what they produce. And I think -- I think that should be something addressy -- I don't think it's the most pressing problem now at all. We are trading away a little bit of our country all the time for

his access consumption that we have over what we've produced. That is not good. I think it's terrible over time. But ouountry's productive grows enough so we actually can do that, and we'll still be better off. We just don't be as well off as we hadn't done it.

Charlie Rose:What's all this going to do to the price of the dollar?

Warren Buffett:t could be very tough on -- inflation could be a very -- is a likely consequence out of what's going on now. Right now, wen effect making a -- to some extent, making a choice between future inflation and getting our -- getting off the floor. Andwe're likely -- we're likely to have more inflation in the future as a consequence of the things we do to fight the presentituation.

Charlie Rose:

Senator Obama, who you support, I think, I don't want -- to be clear on this, but made an economic speech today, talksbout another stimulus program. Is that essential at this time?

Warren Buffett:think the biggest thing we need now is to unclog the credit markets, and we may need another stimulus -- if we do, it's -hould go to the lower and middle-income people. I mean the truth is, I've never had it so good in terms of taxes. I amaying the lowest tax rate that I've ever paid in my life. Now, that's crazy. And if you look at the Forbes 400, they areaying a lower rate, accounting payroll taxes, than their secretary or -- whomever around their office. On average. And shink that actually people in my situation should be paying more tax. I think the rest of the country should be paying lesshe 95 percent that Obama talks about or maybe even a little higher than that. But I think that a stimulus plan should reae geared to the people. You know, you've got -- you've got, what, 24 million households, 1/5th of the households of the

United States, you have earning $21,000 a year or less, on average of close to four people, three people in those househoTwo and a half they will actually probably. But just imagine living on 21,000 a year, Charlie, 22,000 a year. I mean you h0 percent of the population doing that. So you don't have to worry about guys like me. I would push purchasing power ou push out $1,000 of purchasing to those people, it's going to get -- it's going to get spent. And it needs to be spent. T


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eed it. And it should come, to some extent, from guys like me.

Charlie Rose: what about the capital gains tax?

Warren Buffett:Well, you know, the capital gains tax is 15 percent now. So I sit there in my office and I make a lot of money by capitalains, and I pay 15 percent, and I pay no payroll tax on it.

Charlie Rose:Right.

Warren Buffett:The woman that comes in, takes the wastebasket away, she's paying 15.3 or whatever it is on payroll tax alone. I mean i- I never had it so good.

Charlie Rose:So therefore the capital gains tax should be changed to 18, 25, 30?

Warren Buffett:think it's terrible for people in effect to say that income from investment should be taxed at a much lower rate than incom

rom labor. I mean I just think that you're going to -- we're going to spend 3.1 trillion, something like that, this year. Weoing to only raise about 2.6 trillion or something like -- you're going to raise it from somebody. You know. Now, who yooing to get it from, you're going to get it from me and you, or you're going to get it from, you know, the people that drive

he taxis, bring me here. Whatever. Maybe. I mean you got to get it from somebody. And, you know, everybody is agaaying tax. I feel the same, everybody feels that way. But if you want a government that's going to do the things we askovernment to do, you've got to get it from somebody. And over the years, the last -- particularly the last six or eight yehey've taken less and less from a guy like me. Now, you know, everybody likes to talk about how the top one percent pahis percent in income, but the income tax, we'll say 1.3 trillion. The payroll taxes are over 900 billion. That 900 billion, toesn't come from me. I pay it on the first hundred thousand or something like that. But that comes from the people in mffice. And they are paying 900 billion -- nobody ever talked about that when they talk about what the one percent isaying. I love to tell how I'm suffering because one percent we're paying 25 percent of the total. We're not paying 25ercent of the total taxes on individuals. We're paying maybe 25 percent of the income tax, but the payroll tax is over a tf the receipts of the federal government. And they don't take that from me on capital gains. They don't take that from mn dividends. They take from the woman who comes in and takes the wastebaskets out.

Charlie Rose:You mentioned inflation. The possibilities of inflation. Are you therefore -- do you have a position on what interest rates -what the fed should do about interest rates?

Warren Buffett:Well, I think that's almost -- for the time being, just put that aside and we'll get to that after the patient is up and walkingt's interesting, though. I mean we are -- what's going to happen -- things we're doing are going to have some inflationaronsequences. But, you see, interest rates, you know, very low levels, including the long rates.

Charlie Rose:When we watch this, I mean you and I are having this conversation today. The senate votes tonight. House may vote.eople I talked to today believe it's going to pass. Whatever happened to change minds either in the combination of whathey did with the plan and tweaking the plan, or B, some people got so scared by the failure of the vote last time that itrought home a danger of not doing anything.


Charlie Rose:All right. How will we measure the progress, whether this is working or not? What's the indicia?

Warren Buffett:Yeah. It's going to be tough because the economy is going to be getting worse for a while. And it might fall off a cliff if thoesn't pass. But nobody will ever know that if it does. And so what they will not see immediate reaction. I mean, we'll ounding on the guy's chest, you know, on the floor, and you know, he's not going to just jump up all of a sudden. So it

makes it tough. I mean, it's tough to be in the legislature, you know, and vote for something and then people say, well, yoted all this money and you know, it's all getting spent. It isn't getting spent. It's getting invested. But it's all gettingpent. Nothing's happening. You know, how could you have done that? You haven't done anything for me. I mean, you

hrough all of that. And that's going to be tough. And it takes -- what it really takes is leadership that knows what it's all


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bout and can explain what it's all about. And that people will believe --

Charlie Rose:But hasn't that been missing, though --

Warren Buffett:Sure.

Charlie Rose:- leadership that can explain what it's all about?

Warren Buffett:Absolutely.

Charlie Rose:And the reason you're here and the reason I want to have a kind of fireside chat with you, it is that somehow it hadn't gothrough, the idea --

Warren Buffett:When the president of the United States goes out at, you know, 8:00 o'clock in the morning and then his own party votes im 2 to 1 in the house, you know that somehow a message isn't getting out. It takes real leadership. I mean Rooseveltidn't -- you know, when he came in, he didn't print any money. Well, he actually may have done [unintelligible], but he

wasn't like, you know, you've got the greatest economics professor in the world or anything else. But he did restoreonfidence. And they did a lot of thing. And you needed it. You needed to jump-start the economy. It took a long time.

mean, the world did not change, you know, in 1933 or '4. But we put in things like the FDIC. I think the FDIC was one ofreat inventions of the American [unintelligible].

Charlie Rose:Well, they had to tweak that in terms of his bill, did they not?

Warren Buffett:Yeah. They were -- and --

Charlie Rose:unintelligible] extended five-year.

Warren Buffett:

They're going the right direction, yeah.

Charlie Rose:Roosevelt also said the only thing we have to fear is fear itself, which is clearly the fear that exists in the country. Tell mewhen you worried the most of all the things that you have seen over the last three weeks, say. I mean how about in the month, when did you say, my God, I never knew it could get to this point?

Warren Buffett:Well, I don't get that afraid in a sense because I really do have faith in both -- I know the country works extremely well. Ynow, but when it isn't clogged up. And I know that Congress will do the right thing. But I will tell you, when I watched t

House vote the other day, I wasn't afraid because I -- I still felt something would pass. But I -- we are going through a veery tough period. And, you know, I did not think I would see the day when, you know, an AIG would not be able to havehecks clear.

Charlie Rose:f AIG had failed, would fold man sacks have been exposed and at risk, JP Morgan would have been --

Warren Buffett:verybody would have been exposed, Charlie. Everybody.

Charlie Rose:So why was there even a question of not rescuing AIG at that time?

Warren Buffett:Well, I think what people understand there probably -- well, they were hoping the private sector would do it.


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Charlie Rose:Right.

Warren Buffett:mean, that's the same way I would behave. If I were the treasury secretary or head of the Fed, you know, I would try tcare the hell the out of the private sector and say, you better save this because you're going down with the ship. So youuys save it. And I went as long as I could worrying if they didn't save it, I'd come in.

Charlie Rose:Well, did that in fact happen during this crisis in which the secretary of the treasury said you better save this or we'll all goown?

Warren Buffett:think certainly --

Charlie Rose:You better put up some cash right now.

Warren Buffett:think that they hoped the private sector would come in. And the private sector tried to come in until they saw the size o

he problem. I mean, from were people on that weekend that thought they'd had a solution. And then the hole kept gettigger and bigger. And all of a sudden became apparent that 20 billion wouldn't do it and 30 billion wouldn't do it and 40illion wouldn't do it. So it got beyond anybody's ability to certainly to do it in a short period of time.

Charlie Rose:There was not enough capital available other than from the government.

Warren Buffett:t's an unknown situation. You have the derivative book, [unintelligible] AIG financial products, you know. Nobody's evereard of it except it was a terrific profit center. You know, you could manufacturer earnings out of it, do all these things. will guarantee that you the top management -- and I'm not knocking them for this. I don't think I could have done it. Touldn't get their minds around it. I bought a company called General Reinsurance in 1998 that had a similar but muchmaller operation, had 23,000 contracts in it.

Charlie Rose:And you had to get rid of it.

Warren Buffett:got to get out of this. It cost me 400-and-some million dollars in benign -- in a benign situation. But when this was not enign situation. If AIG had tried to unwind their derivatives books. I don't know. It would have hit every institution in t

world.

Charlie Rose:And there was no private capital to come in and do that.

Warren Buffett:Not big enough.

Charlie Rose:Not even Berkshire Hathaway.

Warren Buffett:No. Not even Berkshire Hathaway. I mean, if I thought 5 or 10 billion would have bought me a good deal, and I could haone that, I'd have done it.

Charlie Rose:They were --

Warren Buffett:'m not bashful.

Charlie Rose:unintelligible] was within reach.


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Charlie Rose:But 85 billion might not have been.

Warren Buffett:

No, no. And the Fed structured that thing very, very well. I mean, they have put themselves in a position --

Charlie Rose:

Yeah.

Warren Buffett:

- where they are very likely to get their money back; maybe more. They participate 80 percent -- I mean, they drove touerms. I mean I want to hire the guy that made that deal. Hed fit in well at Berkshire.

Charlie Rose:

A lot of people look at you and Goldman Sachs and GE saying I want to hire the guy that made that deal for you.

Warren Buffett:

No, Tim Geithner did a better job on this one.

laughter]

Charlie Rose:

So we come down to the close of this conversation and you have been warning us about certain kinds of things. I hear frohis conversation too this plan is essential now. Otherwise were in a very, very difficult place and each week we go beyonot doing something we get deeper and it becomes more irreversible.

Warren Buffett:

And, yeah, whoever said, you know, an ounce of prevention is worth a pound of cure understated it and I you know a pounf cure thats delayed another six months is going to need a ton of cure later on I mean it would be crazy not to do this. I

will not produce dramatic results though in the economy. Thats what people have to understand. Youre going to seenemployment go up. You know, youre going to see lousy earnings in many businesses. And theyre not --

Charlie Rose:

Youre going to see people unemployed.

Warren Buffett:

Youre going to see more people unemployed. But the difference Charlie if we bottom this thing out at seven percentnemployed versus nine percent, thats three million people, thats three million people that if we do it wrong you know loheir jobs unnecessarily in my view I mean you know Ive never been unemployed. Ive never been very fully employedither but just think of what its like, you know, to go home with a mortgage payment you know and kids and everythinglse. My dad had that happen to him in the early 30s. It you know you dont want to create three million people morennecessarily. But I dont think you --

Charlie Rose:

Thats the depression --



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Warren Buffett:

t really is. And you cant help some increase from this point. I dont want any viewer to go away think a magic wand exin Congress. So theyre going to see some more bad news. But if we do this, were doing the right thing. And if -- theystem will work over time. Theres no -- we got a wonderful system.

Charlie Rose:

Okay, but I mean let me come to that in the end. Do we need to do anything about the system? And beyond the emergef the moment, the urgency of the moment, come January, about the system, lots of talk about regulation as you know annding the right balance, lots of talk about whether government involvement is an idea we need more of rather than less o

ethinking sort of what President Reagan brought to fore.

Warren Buffett:

Once we get the [unintelligible] back, we can [unintelligible] changes [unintelligible], exercising [unintelligible], we can dof that sort of thing. And you know if I got any good ideas out of that or I think theyre good ideas, Ill be glad to contribuhem but the system will probably overdo some other things. I mean, the nature of democracy is such that when theres - therell be this revulsion, obviously, toward -- thats never going to happen again, so well probably attack it in various what dont make sense. But I -- thats what Congress is for. And thats what advisors are for. And Im all for getting the

minds you can get to work on that kind of thing. Like I say, I dont think itll be done perfectly. Maybe well end up with attle bit better system. But the end, we had a pretty good system over time. But when we went crazy, and we did go cran residential real estate, it set things in motion that just -- the dominoes started toppling.

Charlie Rose:

Thank you for coming.

Warren Buffett:

Thank you, Charlie.

Charlie Rose:

leasure to see you.

Warren Buffett:

njoyed it.

Charlie Rose:

Warren Buffett. Were in San Diego. My thanks to the people at KPBS here. A conversation here about the crisis that weace, and hearing from a man that a lot of people want to hear from. And Im pleased that we were able to join with himere. Thank you for joining us. See you next time.

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