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CNBC Transcript: Quicken Loans Founder & Chairman Dan Gilbert and Legendary Investor Warren Buffett Speak on Set with CNBC's "Squawk Box" Today

WHEN: Today, Friday, March 14th

WHERE: CNBC's "Squawk Box"

Following is the unofficial transcript of a CNBC interview with Quicken Loans Founder & Chairman Dan Gilbert and billionaire investor Warren Buffett on set for CNBC's "Squawk Box" today, Friday, March 14th. Video and articles from today's interview are available at buffettwatch.cnbc.com.

All references must be sourced to CNBC.

BECKY QUICK: MARCH MADNESS IS HERE AND THE STAKES ARE HIGHER THIS YEAR. IT IS THE EPIC BATTLE FOR THE NATIONAL CHAMPIONSHIP IN MEN'S COLLEGE BASKETBALL. THESE ARE THE TEAMS THAT ARE IN SO FAR. THEY HAVE AUTOMATIC BIDS FROM WINNING THEIR CONFERENCE TOURNAMENTS. THE REST OF THE FIELD WILL BE SET ON SUNDAY NIGHT. AND GET READY, FOLKS. QUICKEN LOANS IS UPING THE ANTE THIS YEAR WITH THE QUICKEN LOANS BILLION DOLLAR BRACKET CHALLENGE WITH YAHOO! SPORTS. QUICKEN IS OFFERING $1 BILLION AS A GRAND PRIZE FOR A PERFECTLY PICKED BRACKET. WARREN BUFFETT IS BACKING THIS COMPETITION WITH BERKSHIRE HATHAWAY. THEY'RE THE ONES WHO HAVE TO PAY OFF IF THERE'S ACTUALLY A WINNER FOR THIS. THERE'S ALSO AN OFFER OF $100,000 TO EACH OF THE CONTEST'S TOP 20 MOST ACCURATE BRACKETS. ALSO WORTH NOTING, QUICKEN IS DONATING $1 MILLION TO HELP URBAN YOUTH EDUCATION PROJECTS IN DETROIT AND CLEVELAND AS PART OF THIS CONTEST. SO WHAT HAPPENS IF YOU NAIL ALL OF YOUR BRACKET PICKS AND WIN THE GRAND PRIZE? YOU HAVE TWO PAYMENT OPTIONS HERE. ONE, YOU GET TO PAY OVER TIME. YOU GET $25 MILLION A YEAR FOR 40 YEARS. OR TWO, YOU CAN GET A LUMP SUM OF $500 MILLION RIGHT UP FRONT. YOU CAN ENTER ON THE QUICKEN LOANS BRACKET.COM WEBSITE. ALL YOU HAVE TO DO IS GO THROUGH YAHOO!'S FANTASY SPORTS PAGE. YOU HAVE UNTIL MARCH 20th AT 1:00 A.M. EASTERN TIME TO ENTER AND ONLY THE FIRST 15 MILLION ENTRANTS ARE ELIGIBLE FOR PRIZES. QUICKEN LOANS FOUNDER AND CHAIRMAN DAN GILBERT AND WARREN BUFFETT, WHO IS THE CHAIRMAN AND CEO OF BERKSHIRE HATHAWAY, THEY ARE WITH US THIS MORNING TO TALK MORE ABOUT THIS. AND GUYS, CONGRATULATIONS. YOU'VE HAD US BUZZING ABOUT THIS SINCE YOU ANNOUNCED IT.

DAN GILBERT: WELL THANK YOU. WE'RE HOPING SOMEBODY WINS. I DON'T KNOW IF WARREN IS HOPING.

WARREN BUFFETT: WELL, I'LL TRY TO SOUND RATHER BROAD-MINDED ABOUT IT. OF COURSE I HOPE SOMEBODY WINS.

QUICK: WELL LET'S TALK ABOUT THE ODDS OF SOMEBODY WINNING BECAUSE WE HAVE HAD MATH PROFESSORS WHO HAVE BEEN ON, WE HAVE HAD ALL KINDS OF PEOPLE WHO HAVE TRIED TO GLEAN THE ODDS. WHAT ARE THE ODDS? WARREN, HOW DID YOU FIGURE THIS OUT?

BUFFETT: WELL, IF IT WERE PURELY CHANCE, SO THAT EACH TEAM WAS AS LIKELY TO WIN AS ANOTHER TEAM. THEN IT WOULD BE SOMETHING LIKE 2 TO THE 63rd. BUT IT'S NOT THAT AT ALL. IT'S NOT LIKE FLIPPING COINS. AND IF THERE WERE A COIN FLIPPING CONTEST AND YOU HAD A BRACKET, HEADS OR TAILS, THEN THAT'S THE RIGHT WAY TO FIGURE IT.

JOE KERNEN: QUINTILLION IS THE NUMBER I THINK. IN THE QUINTILLIONS.

BUFFETT: BUT ANYBODY THAT SAID THAT, ANY MATH PROFESSOR BETTER HAVE TENURE BECAUSE HE OR SHE IS IN TROUBLE IN TERMS OF REALLY FIGURING ODDS. THE NUMBER ONE SEED TEAM HAS BEATEN THE NUMBER 16 SEED TEAM OVER 100 TIMES IN A ROW. THE NUMBER TWO SEED HAS ALMOST ALWAYS BEAT THE 15 SEED. SO, YOU JUST HAVE TO MAKE A CALCULATION AS TO PROBABILITIES. AND THERE'S NO RIGHT ANSWER. I MADE A CALCULATION, ANOTHER FELLOW AT OUR INSURANCE COMPANY MADE A CALCULATION, WE WERE SOFT OF IN THE SAME BALLPARK OF WHAT WAS A VERY LARGE BALLPARK AND THEN WE QUOTED A PRICE. BUT IT ONLY TOOK 10 OR 15 MINUTES.

GILBERT: YOU KNOW, WHEN I HEARD THE QUINTRILLION, I WAS GOING TO CALL WARREN AND SAY, "WARREN, QUINTRILLION? I DON'T KNOW ABOUT THIS. DO WE NEED INSURANCE HERE?" BUT OF COURSE, YOU KNOW, HE EXPLAINS IT RIGHT. FIRST OF ALL, YOU HAVE 15 MILLION ENTRIES. THAT'S ANOTHER THING, RIGHT? IT'S NOT JUST ONE PERSON, IT'S 15 MILLION. PLUS ISN'T IT SUBJECTIVE? I MEAN YOU CAN'T REALLY SAY BECAUSE, HOW MUCH DOES THE 16 REALLY GIVE YOU? THE 16 ALWAYS LOSING TO THE 1 GIVE YOU ODDS, HOW MUCH ODDS DOES IT INCREASE IT BY?

QUICK: RIGHT.

BUFFETT: IF YOU GIVE ME $10 YOU CAN HAVE THE CONTRACT BACK.

GILBERT: NO, THAT'S OKAY. WE'RE REALLY HAPPY WITH THE CONTRACT.

QUICK: HOW MUCH DID IT COST YOU TO BUY INSURANCE?

GILBERT: A LOT. A LOT.

BUFFETT: NOT ENOUGH. NOT ENOUGH.

KERNEN: NOT ENOUGH.

BUFFETT: NO, NOT ENOUGH, JOE.

QUICK: WAS IT NORTH OF $10 MILLION?

GILBERT: I DON'T KNOW. I DON'T KNOW THE EXACT AMOUNT.

BUFFETT: I DO.

GILBERT: YEAH, YOU DO. IT WAS JUST SOMEWHERE IN THERE.

KERNEN: WE HAVE A PICTURE OF YOU THAT WE KEEP SHOWING WHERE YOU'RE LEANING YOUR HEAD BACK LAUGHING. WHICH IS WHAT YOU'VE BEEN DOING WITH WHAT'S BEEN HAPPENING WITH A LOT OF YOUR INSURANCE ENTITIES LATELY. IT'S A GREAT BUSINESS. YOU TAKE IN PREMIUMS AND MOST OF THE TIME THINGS DON'T HAPPEN.

BUFFETT: THEN KATRINA COMES ALONG AND WE WRITE A CHECK FOR 3 BILLION.

KERNEN: OH NOW, THE LAST TIME YOU WERE ON, YOU TOLD US KATRINA SET YOU UP FOR THE NEXT FIVE YEARS WHERE IT WAS RELATIVELY QUIET BUT YOU WERE ABLE TO HAVE SOME NICE PREMIUM INCREASES INITIALLY, RIGHT?

BUFFETT: WELL, HURRICANES HAVE NO MEMORIES. I MEAN, YOU CAN HAVE ANOTHER ONE RIGHT AFTER KATRINA.

KERNEN: BUT, IT'S BEEN A GREAT BUSINESS TO BE IN?

BUFFETT: WE ACTUALLY IN THE UNITED STATES HAVE ALMOST ELIMINATED OUR CATASTROPHE INSURANCE BUSINESS. WE'VE WRITTEN QUITE A BIT OVER IN ASIA. BUT THE RATES CAME DOWN DRAMATICALLY.

KERNEN: RIGHT.

BUFFETT: AND WE DO NOT REGARD THE EXPOSURES AS HAVING COME DOWN DRAMATICALLY. SO WE'RE NOT WRITING THAT BUSINESS.

KERNEN: BUT, SO IF THE RATES ARE – YOU KNOW, EVERYTHING WE HEAR ABOUT THE INCIDENTS OF THINGS LIKE THAT IS THE OPPOSITE OF WHAT THE RATES TELL US. AND YOU KNOW WHO I BELIEVE? I BELIEVE THE RATES. BECAUSE I KNOW HOW INSURANCE COMPANIES WORK. THEY KNOW EXACTLY WHAT THEY'RE DOING WHEN THEY'RE SETTING PRICES, AS YOU KNOW. YOU'RE SLY AS A FOX. YOU KNOW EXACTLY WHAT YOU ARE DOING WITH THIS. IT'S A GREAT BUSINESS.

BUFFETT: DEPENDS ON WHAT YEAR YOU'RE LOOKING AT.

KERNEN: YOU JUST PASSED CARLOS SLIM TO BE NUMBER TWO IN THE WORLD. IT'S A GREAT BUSINESS TO BE IN.

QUICK: YEAH, BUT HE'S NOT WRITING PREMIUMS ON IT.

KERNEN: NO, I KNOW.

BUFFETT: NO, BUT WE DID THAT OUT AT DAIRY QUEEN.

KERNEN: BUT, EVEN -- NO. BUT EVEN LIKE, YOU KNOW, OTHER BUSINESSES, OTHER THAN THE PROPERTY CASUALTY INSURANCE, INSURANCE IS A PRETTY GOOD BUSINESS TO BE IN.

BUFFETT: THE PROPERTY CASUALTY BUSINESS HAS EARNED LESS ON EQUITY THAN THE GREAT MAJORITY OF BUSINESSES NOW OVER THE LAST FOUR YEARS.

KERNEN: GEICO IS ONE OF YOUR GREAT BUYS.

BUFFETT: GEICO IS A GREAT BUSINESS.

GILBERT: JOE, YOU TRY AND LOOK AT THE MORTGAGE INSURANCE BUSINESS, NOT SUCH A GREAT BUSINESS. NOT ALL INSURANCES ARE SO GREAT.

KERNEN: YEAH, THAT'S TRUE.

BUFFETT: BUT THE WAY HE RUNS IT, HE'S DONE A GREAT JOB IN MORTGAGE BANKING. BUT PLENTY OF PEOPLE HAVEN'T. THERE'S A LOT OF WAYS TO GO WRONG IN BUSINESS.

KERNEN: WHEN YOU WATCH BASKETBALL AND YOU SEE THE STUFF THAT HAPPENS, IT MAKES ME THINK EVEN HOW MORE RIDICULOUS IT IS. I MEAN ONE, THE WAY IT BOUNCES AROUND THE RIM AND THE WAY SOME SHOTS GO IN THAT ARE SO SERENDIPITOUS. I MEAN, SO MANY THINGS CAN HAPPEN. I CAN'T BELIEVE, I GUESS IT'S PURE NUMBERS, THOUGH. HOW MANY PEOPLE DO YOU THINK WILL BE IN THIS?

BUFFETT: YOU WANT TO BET AGAINST UCONN WOMEN, FOR EXAMPLE, I MEAN, THE BALLS BOUNCE OUT OF THEM AND ALL THAT.

KERNEN: THEY DO, RIGHT. OR FLORIDA.

BUFFETT: BUT, USUALLY THE BETTER TEAMS WIN.

KERNEN: THEY DO.

BUFFETT: YEAH.

GILBERT: WARREN INSURED IT FOR 15 MILLION ENTRIES. AND YOU CAN ONLY HAVE ONE ENTRY PER PERSON. SO ITS 15 MILLION.

KERNEN: 15 MILLION.

GILBERT: ABOVE THAT, IF MORE PEOPLE WANT TO ENTER, WE'LL PROBABLY CALL WARREN UP AND SAY HOW MUCH MORE IS THE INSURANCE? I DON'T THINK HE'LL SQUEEZE US THAT HARD AT THAT POINT. HE'LL GIVE US DEFINITELY A GOOD RATE.

BUFFETT: SOFT HEARTED WARREN. I SHOULD BE INSTITUTIONALIZED.

QUICK: HOW DID YOU GUYS COME UP WITH THE WHOLE PLAN FOR IT? HOW DID THAT WORK?

GILBERT: WARREN CAME TO DETROIT IN NOVEMBER AND WE WERE TOURING HIM THROUGH THE CITY AND EVERYTHING THAT'S GOING ON IN DOWNTOWN DETROIT. A LOT OF EXCITING THINGS THERE. AND ON THE WAY OUT, HE DID THE OLD KIND OF COLOMBO THING. OH YEAH, ONE MORE THING AND HE SAID, "I'VE BEEN THINKING ABOUT THIS CONCEPT OF INSURING A BILLION DOLLARS FOR THE TOURNAMENT. WOULD ONE OF YOUR COMPANIES BE INTERESTED IN IT?" AND SO, I THOUGHT HE WAS KIDDING AT FIRST. BUT HE WASN'T KIDDING. I TALKED TO JAY FARNER AT QUICKEN LOANS, OUR CHIEF MARKETING OFFICER AND PRESIDENT. AND HE LOVED IT. AND SO WE CALLED UP AND MADE A DEAL. HE'S THE EASIEST GUY IN THE WORLD TO DO BUSINESS WITH. YOU KNOW, JUST NO BUREAUCRACY, NO COMMITTEES, NO LONG CONTRACTS. JUST, OKAY, YOU KNOW, MAKE IT HAPPEN.

QUICK: IT STIRRED UP A LITTLE BIT OF DUST WHEN WE HEARD THAT YAHOO! HAD BEEN INTERESTED IN DOING A SIMILAR ONE. THEY'RE NOW INVOLVED WITH YOU ON THIS DEAL.

GILBERT: YEAH WELL YOU KNOW, AT YAHOO! AFTER WE ANNOUNCED IT, THEY CONTACTED US AND SAID THEY WERE THINKING ABOUT SOMETHING SIMILAR. SO WE SAID LET'S WORK TOGETHER ON THIS. AND THEY'VE BEEN A GREAT PARTNER. WE'RE USING THEIR TECHNOLOGY AND THEY'RE POWERING IT THAT WAY. WE'RE MARKETING IT TOGETHER.

KERNEN: YOU KNOW, THIS IS GOING TO BE LIKE WHEN YOU DO THE POWERBALL AND YOU GET THEM. AND YOU'RE READY, AND THEY'RE ANNOUNCING THE NUMBERS. AND THE VERY FIRST NUMBER COMES OUT AND OH!

QUICK: I LOST ALREADY!

KERNEN: THE VERY, YOU KNOW, IN THE FIRST --

BUFFETT: LOOK, WE'LL LET YOU KNOW AFTER THE FIRST 32 GAMES HOW MANY PEOPLE ARE LEFT.

KERNEN: THAT'S GOING TO BE REALLY INTERESTING.

BUFFETT: THAT WILL BE FUN, WON'T IT?

KERNEN: THAT WILL BE REALLY INTERESTING.

QUICK: HOW MANY DO YOU EXPECT WILL STILL BE IN IT AFTER THAT?

KERNEN: BECAUSE THERE ARE HUGE UPSETS ALL THE TIME.

BUFFETT: I'VE GOT AN EXPECTATION, BUT –

QUICK: YOU GO FROM 15 MILLION TO WHAT? WE HAD SOMEBODY ON YESTERDAY WHO SAID HE SUSPECTED THERE WOULD BE SEVERAL HUNDRED LEFT.

BUFFETT: THAT'S A PRETTY GOOD GUESS.

QUICK: REALLY?

BUFFETT: YEAH.

QUICK: THAT WAS A MATH PROFESSOR, BY THE WAY.

BUFFETT: YEAH. THAT'S A PRETTY GOOD GUESS. NOBODY KNOWS. AND IT'S BEEN SO MUCH ON WHETHER YOU GET, YOU KNOW, A FLORIDA TEAM FROM LAST YEAR OR SOMETHING. BUT, IT'S NOT A BAD GUESS.

KERNEN: FOR SOME REASON IT SEEMS, TO ME, HARDER THIS YEAR BECAUSE EVERYONE BUT FLORIDA HAS LOST TO A CRAPPY TEAM AT SOME POINT IT SEEMS LIKE.

BUFFETT: YEAH, BUT YOU WOULD BET THE 8 NUMBER – WELL THE 4 NUMBER ONE SEED, YOU'D BET THEY WIN.

KERNEN: YEAH. YOU WOULD.

BUFFETT: AND YOU'D GIVE A LOT OF ODDS ON THAT EVEN.

KERNEN: YOU PROBABLY WOULD, BUT IS IT HARDER THIS YEAR, DO YOU THINK?

BUFFETT: WELL, THE MORE EVEN IT IS, THE HARDER IT IS.

KERNEN: AND I SAY CRAP. I SHOULDN'T. BECAUSE EVEN THE TEAMS THAT AREN'T THAT GOOD CAN HAVE UNBELIEVABLE NIGHTS. AS WE SAW WAKE FOREST BEAT DUKE, RIGHT? I MEAN WE SEE AMAZING STUFF. SOMETHING HAPPENED LAST NIGHT, WHAT WAS IT? SETON HALL WON LAST NIGHT, BEAT VILLANOVA. DID YOU SEE THAT?

BUFFETT: WELL, CREIGHTON BEAT VILLANOVA TWICE BY A PRETTY GOOD MARGIN. BUT VILLANOVA WAS RANKED NUMBER THREE HERE THE OTHER DAY.

KERNEN: AND DIDN'T XAVIER ALREADY BEAT CREIGHTON?

BUFFETT: YUP. I THOUGHT YOU MIGHT BRING THAT UP. YOU WANT TO GIVE A MINUTE BY MINUTE RECAP OF THE GAME OR ANYTHING?

KERNEN: YEAH. THAT'S HAPPENING TONIGHT AGAIN, I THINK. THE REMATCH.

BUFFETT: WELL THEY'RE PLAYING AGAIN TONIGHT. THE RESULT WON'T BE THE SAME TONIGHT.

GILBERT: I JUST WANT TO KNOW HOW YOU GUYS KNOW ALL OF THIS ALREADY? YOU KNOW EVERY SINGLE GAME, WHO'S WON WHAT?

KERNEN: I DON'T KNOW WHY EITHER.

BUFFETT: WE'RE NOT ALLOWING HIM TO ENTER.

KERNEN: LIKE THE LAST FEW YEARS WE'VE DONE IT WITH -- HERE WITH OUR TVNEWSER BRACKET. AND I GET – THERE'S HOW MANY GAMES? THERE'S – THE FIRST DAY THERE'S 32.

BUFFETT: 32.

KERNEN: AND I'M ON THE EDGE OF MY SEAT FOR 32 GAMES. I LOVE THAT. I LOVE THE LAST THREE MINUTES. AND I CARE ABOUT 32 – THIS IS ON AND ACTUALLY WE TAKE A -- I'M OFF NEXT WEEK, BELIEVE IT OR NOT. AND I GO OUT AND I'LL BE WATCHING –

QUICK: EVERY MINUTE OF IT.

KERNEN: I DIDN'T TAKE OFF JUST FOR THAT.

BUFFETT: BUT THERE WILL BE QUITE A FEW PROBABLY THAT GET THE FIRST 32.

KERNEN: SO YOU'RE THINKING THE FINAL FOUR WE MAY ALREADY KNOW IT, YOU THINK?

BUFFETT: THE FINAL FOUR AND THERE ARE A COUPLE OF GUYS LEFT THAT I THINK --

KERNEN: WOULD YOU TAKE THE FOUR NUMBER ONE --

BUFFETT: I WILL GO IN THE WITNESS PROTECTION PROGRAM, THAT'S MY BET.

KERNEN: SO YOU THINK WICHITA STATE IS FOR REAL, TOO, THEN? I DO. I THINK WICHITA STATE IS FOR REAL. THERE ARE PEOPLE STILL QUESTIONING WHETHER THEY SHOULD BE --

BUFFETT: OH YEAH. CREIGHTON USED TO PLAY THEM. WE USED TO PLAY THEM QUITE OFTEN, BUT WICHITA STATE IS --

QUICK: DAN, DO YOU HAVE A TEAM IN THIS?

GILBERT: I'M MICHIGAN STATE. I'VE GOT TO GO WITH TOM IZZO. THAT'S WHERE I WENT TO SCHOOL.

KERNEN: YOU JUST LOST TO OHIO STATE.

GILBERT: YEAH, STUFF HAPPENS DURING THE REGULAR SEASON. BUT I MEAN –

KERNEN: THAT WAS A GREAT GAME THOUGH.

GILBERT: NOBODY HAS PLAYED FOR TOM IZZO THAT HASN'T BEEN IN A FINAL FOUR. THAT'S PRETTY AMAZING.

KERNEN: I TOOK THEM ONE OTHER YEAR AND GOT MAD. I THINK IT WAS LAST YEAR OR THE YEAR BEFORE. THEY DISAPPOINTED ME. I HAVEN'T HAD THE FINAL TEAM THE LAST TWO YEARS.

GILBERT: AND THEY'VE HAD INJURIES ALL YEAR, IT'S BEEN CHALLENGING, BUT I WOULDN'T COUNT THEM OUT.

BUFFETT: I THINK THEY PLAY BETTER THOUGH WHEN THIS COMES ABOUT.

KERNEN: I DO, TOO. WELL, LOUISVILLE –

BUFFETT: IT'S HARD TO STAY UP FOR EVERY GAME DURING A REGULAR SEASON.

KERNEN: WELL, THE NUMBER ONE SEED WON THE LAST TWO YEARS. NOT NUMBER ONE SEED, THE NUMBER ONE TEAM IN THE COUNTRY. KENTUCKY WON AND THEN LOUISVILLE. AND LOUISVILLE IS PEAKING AGAIN IT SEEMS LIKE. ANYWAY, WE'RE GOING TAKE A BREAK. PEOPLE ARE GOING TO THINK THIS IS ESPN. ARE WE ALLOWED TO ASK YOU ANYTHING ABOUT GM?

BUFFETT: YOU CAN ASK ME ANYTHING. YOU CAN ASK ME WHAT'S ON WILT CHAMBERLAIN'S TOMBSTONE FOR ALL I CARE.

KERNEN: I LIKE WHAT'S GOING TO BE ON YOUR TOMBSTONE IS MY – OH YEAH. YOU'RE DIRTY. TALKING ABOUT WILT. BUT ON YOURS IS MY FAVORITE.

QUICK: WHAT IS IT? NOW YOU HAVE TO TELL US.

KERNEN: ON HIS?

BUFFETT: ON WILT'S.

QUICK: ON WILT'S.

BUFFETT: ON WILT CHAMBERLAIN'S TOMBSTONE?

QUICK: YEAH.

BUFFETT: AT LAST I SLEEP ALONE.

KERNEN: AND YOURS IS, HE LIVED TO BE REALLY, REALLY, REALLY, REALLY, REALLY – HOW MANY REALLIES?

BUFFETT: AS MANY AS I CAN GET.

KERNEN: REALLY, REALLY OLD.

QUICK: WHEN WE COME BACK WE ARE GOING TO SHIFT GEARS. DAN IS HERE. WE HAVE TO TALK TO HIM ABOUT HOUSING. WE'VE GOT BOTH OF THESE GENTLEMEN TO TALK ABOUT THE ECONOMY. WE HAVE MUCH MORE WITH OUR VERY SPECIAL GUESTS THIS MORNING, DAN GILBERT OF QUICKEN LOANS AND WARREN BUFFETT OF BERKSHIRE HATHAWAY. RIGHT NOW AS WE HEAD TO A BREAK, CHECK OUT THE "SQUAWK BOX" MARKET INDICATOR. YOU WILL SEE THAT THINGS HAVE TURNED AROUND. WE HAD BEEN LOOKING FOR A GAIN WITH THE FUTURES UP ABOVE FAIR VALUE. THAT'S TURNED AROUND AND YOU CAN SEE RED ARROWS NOW. "SQUAWK BOX" WILL BE RIGHT BACK.

QUICK: LET'S GET BACK TO OUR TWO SPECIAL GUESTS. OUR GUESTS ON SET WITH US TODAY, QUICKEN LOANS FOUNDER AND CHAIRMAN DAN GILBERT AND WARREN BUFFETT WHO IS THE CHAIRMAN AND CEO OF BERKSHIRE HATHAWAY. THEY'RE JOINING US ONCE AGAIN TO TALK A LITTLE BIT MORE ABOUT WHAT'S GOING ON. GENTLEMEN, YOU TWO BOTH HAVE VERY GOOD PERSPECTIVES – UNIQUE PERSPECTIVES OF THE ECONOMY. I'D LIKE TO GET YOUR THOUGHT ON THE ECONOMY, BUT ALSO, WITH THE MARKETS. AND WARREN, THERE WAS A BIG CONCERN YESTERDAY IN THE MARKETS ABOUT WHAT'S HAPPENING IN CHINA, WHAT'S HAPPENING IN UKRAINE. ARE THESE FEARS WARRANTED?

BUFFETT: WELL I DON'T KNOW WHETHER THEY'RE NOT WARRANTED IN TERMS OF THE MARKET. I MEAN, I DIDN'T SELL MY FARM YESTERDAY WITH IT. I DIDN'T SELL MY PROPERTY DOWN NEAR NYU SO WHY SHOULD I SELL MY BUSINESSES?

QUICK: BUT YOU'RE IN A POSITION OF NOT NECESSARILY NEEDING THAT INCOME. IF YOU WERE SOMEBODY WHO WAS A SENIOR, IF YOU'RE GETTING TOWARDS RETIREMENT AND YOU'RE THINKING, "OH MY GOSH, WHAT SHOULD I BE DOING? I'VE SEEN A BIG RUN UP. SHOULD I PULL SOME BACK AT THIS POINT?" IF YOU'RE SOMEBODY WHO HAS BEEN SAVING FOR YOUR KID'S COLLEGE AND THEY ARE GETTING READY TO GO TO COLLEGE, THEY ARE A LITTLE MORE WORRIED ABOUT THE DAY-TO-DAY TRADES ON THESE THINGS.

BUFFETT: IF YOU'RE GOING TO USE THE MONEY FOR COLLEGE IN THE NEXT YEAR OR TWO THEN – WHEN YOU HAVE ENOUGH MONEY FOR THE COLLEGE, YOU PROBABLY OUGHT TO SELL IT, BUT IF YOU ARE TALKING ABOUT INCOME, I WOULD BET A LOT OF MONEY THAT INCOME FROM A DIVERSIFIED GROUP OF STOCKS WILL INCREASE SIGNIFICANTLY OVER THE NEXT 20 YEARS. SO THE HEADLINES WILL NOT MAKE ANY DIFFERENCE IN THAT. STOCKS CAN GO UP AND DOWN. THEY ALWAYS WILL GO UP AND DOWN. BUT, AMERICAN BUSINESS IS GOING TO MOVE FORWARD OVER TIME.

QUICK: OKAY.

BUFFETT: AND THE DIVIDENDS WILL MOVE WITH IT.

QUICK: YOU KNOW, DAN, WE --

GILBERT: I JUST AGREE WITH HIM, WHATEVER HE SAYS.

QUICK: WELL, YOU HAVE A UNIQUE PERSPECTIVE ON WHAT'S HAPPENING WITH HOUSING RIGHT NOW. WITH QUICKEN YOU ARE LOOKING AT MORTGAGE ORIGINATIONS CONSTANTLY. WHAT DO YOU THINK ABOUT WHAT'S HAPPENING IN THE HOUSING MARKET RIGHT NOW BASED ON WHAT YOU ARE SEEING?

GILBERT: YEAH WELL, WHAT WAS INTERESTING IS LAST YEAR THERE WAS A COUPLE REPORTS THAT CAME OUT AND YOU KNOW, SOMETIMES THESE REPORTS COME OUT AND YOU HAVE TO VERIFY THEM AND THEY ARE CONFLICTING, BUT CLOSE TO 50% OF PURCHASES AT HALF OF THE YEAR LAST YEAR, AT LEAST MIDYEAR, WERE CASH PURCHASES. MEANING THAT THEY WERE INVESTORS OR THEY WERE HEDGE FUNDS OR BIG FUNDS PUTTING MONEY TOGETHER AND GOING AFTER A LOT OF THE HOMES THAT WERE FORECLOSED AND EVERYTHING ELSE. SO THE QUESTION IS WHAT PERCENT OF THE HOUSING COMEBACK HAS BEEN PROMPTED UP OR PROPPPED, RATHER, UP BY THESE INSTITUTIONAL-LIKE INVESTORS, WHICH WE REALLY HAVE NEVER SEEN BEFORE IN HOUSING. YOU HAVE NEVER SEEN THIS BEFORE. YOU HAD INDIVIDUAL, LOCAL INVESTORS BUYING HOMES. THAT'S ALWAYS BEEN THERE. BUT YOU'VE NEVER SEEN, SORT OF, THESE BIG INSTITUTIONAL BUYS OF MASS AMOUNTS OF HOUSING.

QUICK: WARREN, WE MIGHT BE ABLE TO THANK YOU FOR THAT. YOU MADE THE CALL SEVERAL YEARS AGO THAT IT WAS THE BEST INVESTMENT AT THE TIME.

BUFFETT: YEAH. GOOD TIME TO BUY HOUSING. WHAT YOU HAVE HAD IS DURING THE HOUSING RUNUP, THE PERCENTAGE OF PEOPLE LIVING IN OWNER-OCCUPIED HOMES WENT FROM LIKE, I THINK, 64% UP TO LIKE 68% OR SOMETHING LIKE THAT. NOW IT HAS FALLEN BACK TO CLOSE TO 63%, I BELIEVE. SO YOU'VE HAD A RESET, AGAIN, TO SORT OF THE NORMAL LEVEL ALMOST OF PEOPLE WHO OWN VERSUS RENT. AND MAYBE THAT WILL SWING EVEN BEYOND THE NORMAL LEVEL. IT KIND OF LOOKS THAT WAY. BUT IN THE END WE'RE GOING TO HAVE MORE HOUSEHOLDS IN THIS COUNTRY AND WE'RE GOING TO HAVE --

GILBERT: YEAH, I WAS GOING TO SAY THAT. YOU HAVE NET NEW HOUSEHOLDS FORMING AT THE PACE OF A MILLION TO 2 MILLION, DEPENDING ON AGAIN, WHAT NUMBERS YOU'RE LOOKING AT ON AN ANNUAL BASIS. AND WHEN YOU DON'T HAVE NEW CONSTRUCTION FOR A LONG PERIOD OF TIME OR VERY LITTLE, THERE'S A SUPPLY AN DEMAND THING.

QUICK: WELL DAN, YOU'VE ANALYZED IT. HOW MUCH DO YOU THINK THE HOUSING MARKET HAS BEEN PROPPED UP BY INSTITUTIONAL INVESTORS?

GILBERT: YOU KNOW, HALF MAYBE. WHATEVER THAT MEANS.

QUICK: BUT THEY'RE NOT BUYING ANYMORE, ARE THEY? BECAUSE WE'VE TALK TO SOME OF THEM RECENTLY.

GILBERT: WELL, YOU KNOW, SOME OF THEM MAY STILL BE BUYING. OBVIOUSLY THEY'RE NOT BUYING LIKE THEY WERE. BECAUSE THE PRICES AREN'T THERE AND NOR IS THE SUPPLY SO, IT'S GOING TO BE – THE NEXT SIX MONTHS OR NINE MONTHS ARE GOING TO BE REAL INTERESTING TO SEE WHAT HAPPENS WITHOUT THAT SORT OF BUYING SUPPORT THERE.

KERNEN: WARREN, I'VE ALWAYS WANTED TO ASK YOU ABOUT TRUE BLACK SWAN DISASTERS. THE END OF THE WORLD, CAN ONLY HAPPEN ONCE, THANK GOD. BECAUSE PEOPLE PREDICTED A LOT. AND WE HAD A – WE LOOKED INTO THE ABYSS IN 2008. BUT LATELY THE CALLS, I'M STARTING TO HEAR THEM AGAIN FROM SOME CIRCLES, MARC FABER OR OTHERS ABOUT TOTAL GLOBAL DEBT. I DON'T KNOW, I SAW THE NUMBER THE OTHER DAY, IT'S LIKE 100 TRILLION OR SOMETHING. YOU WOULD SELL EVERYTHING, I THINK IF THERE WAS GOING TO BE ANOTHER 2008 OR SOMETHING EVEN WORSE. ARE WE SAFE? DID IT HAPPEN ALREADY IN 2008 FOR THE FORESEEABLE FUTURE DO YOU THINK?

BUFFETT: WELL, FOR A WHILE. IT WILL HAPPEN AGAIN SOMEDAY, BUT WE'RE NOT CLOSE TO IT. REMOTELY CLOSE TO IT HAPPENING NOW. BUT IT WILL HAPPEN AGAIN. IT WON'T HAPPEN IN THE SAME WAY. I'M IN THE MIDST OF READING THE GALLEYS OF TIM GEITHNER'S NEW BOOK, WHICH IS JUST SENSATIONAL. I MEAN IT TELLS THE STORY OF EVERYTHING LEADING UP TO 2008 AND SUBSEQUENTLY. IT'S THE BEST I'VE READ. AND THAT WAS SOME PERIOD. WE TALKED ABOUT IT AT THE TIME, BUT EVEN AT THE TIME I SAID IT WAS AN ECONOMIC PEARL HARBOR. I DIDN'T HAVE A – I WASN'T STRONG ENOUGH IN TERMS OF WHAT WAS GOING ON. THAT WON'T HAPPEN AGAIN FOR A WHILE. IT WILL HAPPEN EVENTUALLY. HUMANS WILL BEHAVE IN CRAZY WAYS, BOTH ON THE UPSIDE AND DOWNSIDE IN THE NEXT 50 YEARS. IT'S VERY UNLIKELY THEY DO IT IN THE NEXT FEW YEARS BECAUSE AFTER SOMETHING LIKE 2008, ONCE THEY GET OUT OF THE EMERGENCY ROOM THEY'RE A LITTLE MORE CAREFUL FOR A WHILE.

KERNEN: SO YOU WOULD BE FLABBERGASTED IF THE STOCK MARKETS AROUND THE WORLD WERE TO LOSE 50% OF THEIR VALUE?

BUFFETT: I WOULD SAY THAT WOULD SURPRISE ME A LOT. IT WILL HAPPEN AGAIN BUT NOT FROM THIS LEVEL.

KERNEN: WELL IF IT HAPPENS FROM 100,000 ON THE DOW, I WON'T CARE QUITE AS MUCH.

BUFFETT: AND SOME DAY YOU WILL SEE 100,000 ON THE DOW. I WON'T, BUT YOU WILL.

KERNEN: RIGHT. AND IT COME DOWN TO 50.

BUFFETT: YEAH. AND LISTEN, DURING MY LIFETIME. I MEAN, I SAW IT CROSS 100 WITH BOTH WAYS AT ONE TIME. AND I'VE HAD FOUR TIMES IN BERKSHIRE'S HISTORY WHERE BERKSHIRE HAS GONE DOWN 50%.

QUICK: WOW.

KERNEN: YEAH.

QUICK: YOU SAY THAT THINGS WERE WORSE THAN AN ECONOMIC PEARL HARBOR BASED ON WHAT YOU READ IN TIM GEITHNER'S GALLEYS? OR BASED ON WHAT YOU'VE LEARNED SINCE THEN?

BUFFETT: YEAH. WELL, A COMBINATION. BUT CERTAINLY IT HAS BROUGHT IT BACK TO ME. BECAUSE HE TELLS THE STORY VERY CANDIDLY. I MEAN, IT IS REALLY A GOOD BOOK. AND I FOUND SOME THINGS THAT WERE GOING ON BEHIND THE SCENES THAT I DID NOT KNOW.

KERNEN: WOULD YOU HAVE BEEN MORE HESITANT ABOUT YOUR STEPPING UP FOR GE AND GOLDMAN SACHS AT THE TIME?

BUFFETT: NO, I WOULD HAVE DONE IT. BUT –

KERNEN: YOU WOULD HAVE?

BUFFETT: YEAH.

KERNEN: YOU WOULD HAVE ASKED FOR MORE ON THE PREFERRED STOCK. MORE – A HIGHER YIELD.

BUFFETT: I SHOULD HAVE WAITED INCIDENTALLY. I MEAN, MY TIMING WAS TERRIBLE, BUT –

KERNEN: YEAH, YEAH, YEAH. YOU'RE TIMING HAS ALWAYS BEEN TERRIBLE.

BUFFETT: BUT, THIS COUNTRY, YOU KNOW, WILL COME THROUGH ANYTHING. AND IT WILL GET TESTED OCCASIONALLY.

GILBERT: WHAT WAS THE WORST THING THAT COULD HAVE HAPPENED THAT DIDN'T BASED ON WHAT YOU KNOW NOW IN THE BOOK?

BUFFETT: WELL, THIS ISN'T SO MUCH FROM THE BOOK, BUT IF THEY HADN'T -- IN EFFECT THE TREASURY DID IT, BUT IF THEY HADN'T GUARANTEED MONEY MARKET FUNDS LIKE THAT ONCE THE RUN STARTED, IT WOULD HAVE BEEN ALL OVER.

GILBERT: BUT WHAT DOES THAT MEAN? I'M JUST CURIOUS. WHAT DOES ALL OVER MEAN?

BUFFETT: WELL, I MEAN, THE ECONOMY WOULD HAVE STOPPED UNTIL THE FED AND EVERYBODY WOKE UP AND STARTED REALIZING THERE WAS ONLY ONE PARTY IN THE WORLD THAT COULD HANDLE THE DELEVERAGING THAT WAS GOING ON AND THE FLIGHT FROM EVERYTHING. I MEAN AT THAT POINT IT WOULD HAVE BEEN A FLIGHT FROM EVERYTHING BECAUSE THERE WAS 3.5 TRILLION IN MONEY MARKET FUNDS. AS GEITHNER POINTS OUT IN HIS BOOK, THE FED BECAME THE LENDER OF LAST RESORT TO THE WORLD. I MEAN THE LENDER OF LAST RESORT TO THE UNITED STATES. THEY WERE IT. THEY WERE THE ONLY GAME IN TOWN AND FORTUNATELY, HAD SOMEBODY THAT UNDERSTOOD THE IMPLICATIONS OF THAT IN BOTH BERNANKE AND GEITHNER. AND FOR THAT MATTER, GIVE CREDIT TO PRESIDENT BUSH, TOO.

KERNEN: I'M WATCHING GEITHNER'S BOOK CLIMB ON AMAZON. WHOA.

QUICK: IT'S NOT OUT YET.

KERNEN: NO, I KNOW.

QUICK: BUT IF THAT'S THE CASE, I MEAN THE MONEY MARKETS, THAT WAS LIKE A RUN ON THE BANKS. IF THEY HADN'T ACTED AT THAT POINT, WOULD IT HAVE BEEN TOO LATE THREE DAYS LATER?

BUFFETT: WELL THAT'S WHAT THIS BOOK GETS INTO VERY WELL. AND IT,YES. WHEN BERNANKE SAID TO PELOSI I BELIEVE IT WAS, IF YOU WAIT AROUND FOR A COUPLE MORE DAYS YOU WON'T HAVE AN ECONOMY TO WORRY ABOUT. HE WAS RIGHT. THE UNITED STATES STILL WOULD COME BACK. WE WOULD COME BACK IF WE HAD SOME MASSIVE ATTACK FROM ABROAD. WELL, WE HAD THE WORLD TRADE CENTER AND THAT PARALYZED PEOPLE FOR A SHORT PERIOD OF TIME. BUT THE FARMS DON'T GO AWAY, THE PRODUCTIVE CAPACITY DOESN'T GO AWAY, HUMAN INGENUITY DOESN'T GO AWAY, THE DESIRE FOR PEOPLE TO LIVE BETTER IN THE FUTURE AND FOR THEIR KIDS –

KERNEN: WILL YOU PUT GUARDS ON YOUR TRANSPONDERS, PLEASE? I MEAN, DO YOU THINK ABOUT THAT? HAVE YOU BEEN READING THIS STUFF LATELY? THEY ONLY KNOCK OUT NINE OF THEM. YOU KNOW, THE POWER GRID.

BUFFETT: YEAH.

KERNEN: YOU OWN POWER COMPANIES. YOU MUST. I'M SURE YOU'RE THINKING ABOUT THAT.

BUFFETT: WELL, WE OWN POWER COMPANIES AND WE OWN A RAILROAD. AND BOTH OF THOSE ARE POTENTIAL TARGETS. AND THEY'RE DIFFICULT BECAUSE OF HUGE SIZE AND EVERYTHING TO DEFEND PERFECTLY.

KERNEN: I MEAN, IF THE GRID WENT DOWN FOR A YEAR, WARREN, THAT'S A BLACK SWAN, ISN'T IT?

BUFFETT: YES.

KERNEN: THAT WOULD BE HARD TO COME BACK.

BUFFETT: THAT'S A BLACK SWAN THAT'S BEEN OUT IN THE SUN TOO LONG.

KERNEN: YEAH, BUT THAT WOULD BE HARD. WOULD WE SNAP BACK FROM SOMETHING LIKE THAT? WE HAVE TO MAKE SURE THAT DOESN'T HAPPEN.

BUFFETT: WE WOULD COME BACK. WELL, WE CAME FROM NOTHING ORIGINALLY.

GILBERT: I'M CURIOUS, IF WE WERE ALL USING BITCOIN WOULD THIS HAVE BEEN DIFFERENT IN 2008? WHAT DO YOU THINK OF THAT WHOLE THING? I WAS AT A CONFERENCE, THE ALLEN & COMPANY CONFERENCE IN ARIZONA, THE TECH CONFERENCE, AND BITCOIN WAS THE BIG TWO SYLLABLE WORD EVERYBODY WAS TALKING ABOUT AND TRYING TO UNDERSTAND. JUST CURIOUS ABOUT YOUR THOUGHTS ON THAT.

BUFFETT: STAY AWAY FROM IT. IT'S A MIRAGE BASICALLY. IT'S A METHOD OF TRANSMITTING MONEY. IT'S A VERY EFFECTIVE WAY OF TRANSMITTING WAY AND YOU CAN DO IT ANONYMOUSLY AND ALL THAT. A CHECK IS A WAY OF TRANSMITTING MONEY, TOO. ARE CHECKS WORTH A WHOLE LOT OF MONEY ARE MONEY ORDERS, YOU CAN TRANSMIT MONEY BY MONEY ORDERS. PEOPLE DO IT. I HOPE BITCOIN BECOMES A BETTER WAY OF DOING IT. YOU CAN REPLICATE IT A BUNCH OF DIFFERENT WAYS AND IT WILL BE. THE IDEA THAT IT HAS A HUGE INTRINSIC VALUE IS JUST A JOKE IN MY VIEW.

KERNEN: THAT'S INTERESTING TO COMPARE IT TO THOSE THINGS. HAVE YOU THOUGHT OF THAT?

BUFFETT: WHAT'S IT IS DOING IS TRANSMITTING MONEY.

KERNEN: THERE'S SOMETHING THE CHECKS ARE DRAWING UPON SOMETHING.

BUFFETT: YOU'RE TRANSMITTING MONEY. THERE'S DOLLARS ON BOTH ENDS FROM THE GUY THAT PUTS IT IN.

GILBERT: IT'S A LEDGER, RIGHT, AN ELECTRONIC LEDGER.

BUFFETT: YEAH IT'S A VERY FAST MONEY ORDER ANONYMOUSLY.

QUICK: LET ME ASK YOU BOTH ABOUT WHERE RATES HAVE BEEN HEADED. DAN, YOU HAVE TO HAVE A GOOD IDEA ABOUT WHAT YOU THINK WILL HAPPEN. WE'VE BEEN A LITTLE SURPRISED THAT WE HAVEN'T SEEN RATES PUSH BACK ABOVE 3%. IN FACT, AFTER EVERYTHING THAT HAPPENED YESTERDAY WITH UKRAINE AND CHINA, WE SAW RATES COME BACK BELOW 2.7%. WHAT'S GOING ON?

GILBERT: WE'VE BEEN IN THE MORTGAGE BUSINESS FOR 28 1/2 YEARS NOW, BELIEVE IT OR NOT. I DON'T THINK WE COULD DRINK A BEER LEGALLY WHEN WE STARTED DOING THIS. ALL WE HEARD FOR 29 YEARS IS INFLATION GOES UP AND RATE WILL GO UP. INFLATION OVER THE LAST 25 YEARS HAS BEEN PRETTY STEADY WITHIN 100 TO 150 BASIS POINTS. BUT RATES HAVE BEEN BETWEEN 3% AND 9% MAYBE, MAYBE EVEN HIGHER THAN THAT. FOR ME, I DON'T KNOW IF THERE'S THAT CONNECTION OR NOT OR IF IT'S PERCEIVED OR REAL. I HAVE NO IDEA WHERE RATES ARE GOING. I TRIED THAT TOO MANY TIMES TO PREDICT IT. IT IS A LITTLE BIT SURPRISING, THOUGH, IF SOMEBODY WOULD HAVE SAID THREE, FOUR, FIVE YEARS AGO THAT THERE BE MORTGAGE RATES THAT WENT DOWN TO THE HIGH THREES, I THINK THEY WOULD HAVE PUT YOU IN AN INSTITUTION. IT IS CRAZY THAT 4 ¾ IS CONSIDERED HIGH NOW.

KERNEN: WILL YOU PAY US FOR THIS NEXT COMMERCIAL? CAN YOU WRITE US A CHECK? WHAT WOULD YOU RATHER DO?

BUFFETT: WELL IF IT'S FOR GEICO, MAYBE I WILL.

KERNEN: WHAT DO YOU WANT TO DO? I DON'T CARE WHETHER WE DO OR NOT.

QUICK: THEY JUST SAID 15 HARD IN MY EAR.

KERNEN: YEAH BUT WE DON'T HAVE TO IF WE DON'T WANT TO. LET'S NOT. WE'RE NOT GOING TO. YOU'RE TOO IMPORTANT TO DO THAT. WE'LL GET BACK TO A LOT OF ECONOMICS. I'M OBSESSED. THERE WILL BE A YEAR WHERE A ONE LOSES TO A 16. WHAT WOULD THAT DO TO THIS WHOLE THING? THAT WOULD MESS THINGS UP. BECAUSE NO ONE IS GOING TO TAKE THAT ON --

BUFFETT: ALMOST EVERYBODY WILL TAKE THE NUMBER ONE SEEDS.

KERNEN: DO YOU THINK IT WILL HAPPEN THIS YEAR?

BUFFETT: I WOULD BET HEAVILY AGAINST IT.

KERNEN: SOMEDAY IT WILL HAPPEN.

BUFFETT: OF COURSE IT WILL.

KERNEN: AND THERE MIGHT BE A 2 --

BUFFETT: EVERYTHING HAPPENS SOMEDAY. IF YOU'RE IN THE INSURANCE BUSINESS YOU NEVER FORGET THAT.

KERNEN: THAT IT WILL. OK LET'S GET BACK TO

QUICK: LET'S TALK A LITTLE BIT, GUYS, ABOUT WHAT YOU'RE SEEING AROUND THE COUNTRY. OBVIOUSLY WE TALK ABOUT HOW THINGS ARE IMPROVING. WE HAD JACK WELCH ON YESTERDAY. WARREN, HE ECHOED SOME OF WHAT YOU SAID. HE SAID BASED ON THE BUSINESSES THAT HE'S WATCHING RIGHT NOW, HE SEES ABOUT SIX BUSINESSES THAT HE HAD JUST COME FROM. HE SAYS IT'S THE MOST OPTIMISTIC HE'S HEARD IN ABOUT SIX YEARS IN TERMS OF THE OUTLOOK FOR THIS FULL YEAR. DOES THAT MATCH UP WITH WHAT YOU TWO ARE SEEING RIGHT NOW?

GILBERT: WE'RE INVOLVED IN A LOT OF START UP BUSINESS S STARTUP BUSINESSES. THE MORTGAGE BUSINESS IS MORE MATURE AND THE GAMING BUSINESS THAT HAS INTERESTING CHALLENGES ESPECIALLY ON THE REGIONAL FRONT. SO THE STARTUP BUSINESS IS HARD TO TELL IF THAT'S A FLAG, A SYMBOL FOR THE ECONOMY. I THINK WARREN HAS PROBABLY INVESTED MORE IN MORE MATURE BUSINESSES AND GETS A BIGGER FLAVOR OF WHAT THE ECONOMY IS DOING. THE STARTUPS SEEN IN DETROIT AND ELSEWHERE IS DOING FANTASTIC. VENTURE CAPITALISTS ARE DOING GREAT. THERE'S PROBABLY MORE STARTUPS AND BUSINESSES BEING CREATED IN TECHNOLOGY THAN EVER BEFORE AND OTHERS. I'M VERY OPTIMISTIC ABOUT THE ECONOMY IN THE LONG TERM. I DON'T REALLY KNOW AS MUCH MAYBE THAT YOU DO ABOUT THE SHORT TERM NATURE OF THAT.

BUFFETT: I'VE BEEN REASONABLY BULLISH EVER SINCE THE FALL OF 2009. BULLISH ON STOCKS EARLIER, JUST BECAUSE THEY FELL SO FAR. THE TRAJECTORY STILL LOOKS TO ME PRETTY STEADY. SO I DON'T HAVE ANY REASON TO THINK THAT 2014 WILL BE SOME BREAK-AWAY YEAR ON THE UPSIDE. BUT WE HAVE HAD A RECOVERY THAT'S BEEN DISCOURAGING TO SOME PEOPLE, BECAUSE IT HAS BEEN IN THIS 2%, 2.5% RANGE. THAT'S NOT BAD. IT'S JUST THAT WE FELL SO FAR SO FAST, IT DOES NOT LOOK LIKE WE CAME OUT OF IT VERY FAST. EVERYTHING I SEE IN OUR BUSINESSES IS THAT THEY'RE CONTINUING TO INCREASE AT ABOUT THE SAME TRAJECTORY AS BEFORE.

GILBERT: WARREN ARE YOU SURPRISED THAT WITH THE AMOUNT OF CAPITAL THAT IS ON THE BALANCE SHEETS OF MOST BIG COMPANIES AND THE INTEREST RATES BEING SO LOW THE LACK OF CAPITAL INVESTMENT THAT PEOPLE EXPECTED -- IF YOU WOULD HAVE TOLD PEOPLE THERE WOULD BE SO MUCH CASH ON BALANCE SHEETS, THEY CAN'T GET A RETURN IN INTEREST RATES, WHY AREN'T COMPANIES AND EVEN INDIVIDUALS TAKING BIG CAPITAL INVESTMENTS? THAT'S THE PART I'VE NOTICED. IT SEEMS PEOPLE ARE WAY MORE RISK AVERSE THAN THEY HAVE BEEN.

BUFFETT: WELL WE HAVE INVESTED RECORD AMOUNTS BUT THE INTERESTING THING IS THE BIGGEST AMOUNT OF CASH IS ON THE BALANCE SHEETS OF COMPANIES THAT DON'T NEED CASH. IF YOU HAVE AN EXTRAORDINARILY PROFITABLE BUSINESS, YOU KNOW, WHETHER IT'S APPLE OR WHETHER IT'S MICROSOFT OR WHATEVER, THE CASH JUST ROLLS IN. YOU DON'T HAVE THINGS TO PUT IT IN. YOU PUT A LOT IN R & D BUT THAT GETS EXPENSED. THE RETAINED EARNINGS REALLY DON'T HAVE A PLACE TO GO IN MOST OF THOSE COMPANIES. THAT'S THE REASON THEY'RE WONDERFUL BUSINESSES. GOOGLE IS TRYING TO USE IT IN A FEW OTHER WAYS A REALLY HIGHLY PROFITABLE BUSINESS GENERATES CASH AND THEY DON'T USE IT.

GILBERT: SHOULD THEY BE RETURNING IT TO THE SHAREHOLDERS?

BUFFETT: PROBABLY.

QUICK: LET ME ASK YOU GUYS ABOUT GENERAL MOTORS. I KNOW YOU HAVE TO HAVE SOME THOUGHTS ON THIS. DAN IT'S IN YOUR BACKYARD IN DETROIT. IT'S A BIG DEAL, TOO. MARY BARRA IS IN A TRICKY POSITION AT THIS POINT. WHAT DOES SHE NEED TO DO WHEN YOU'RE LOOKING AT 13 YEARS OF POTENTIAL KNOWLEDGE OF WHAT HAPPENED.

BUFFETT: WHEN YOU'RE IN A SITUATION LIKE THAT, IT REALLY GOES BACK TO WHAT I TOLD THEM AT SOLOMON. FOUR THINGS. GET IT RIGHT, GET IT FAST, GET IT OUT, GET IT OVER. BUT GET IT RIGHT FIRST. IF YOU GET IT OUT BEFORE YOU GET IT RIGHT -- YOU HAVE TO SAY YOUR LIMITATIONS UP FRONT AS TO HOW MUCH YOU KNOW AND HOW MUCH YOU DON'T KNOW. ALWAYS TELL THE TRUTH ABOUT IT AND YOU TRY LIKE THE DICKENS TO FIND OUT AS MUCH AS YOU CAN. A PLACE AS BIG AS GENERAL MOTORS AND SOMETHING THAT GOES BACK MANY YEARS, IT'S HARD TO PUT YOUR ARMS AROUND EVERYTHING, E-MAIL OUT THERE AND ALL OF THAT. THAT IS WHAT YOU'RE TRYING TO DO. YOU'VE GOT TO GET IT RIGHT. YOU DON'T HOLD THEM BACK ONCE YOU GET IT AND YOU GET IT AS FAST AS YOU CAN. THEN YOU DEAL WITH THE AUTHORITIES AND THAT CAN TAKE A LONG TIME.

KERNEN: I THINK BECKY WOULD SAY THEY'VE GOTTEN IT WRONG. IT'S TOO LATE FOR THAT.

BUFFETT: I MEAN SHE'S JUST COME IN.

KERNEN: FOR HER RIGHT BUT FOR THE COMPANY ITSELF, YOU WOULD SAY THEY SHOULD HAVE DONE SOMETHING LONG AGO.

QUICK: YEAH BUT I GUESS SHE HAS A NEW CHANCE TO DO IT.

BUFFETT: RIGHT WELL I HAD A NEW CHANCE AT SOLOMON BECAUSE I CAME IN. SHE HAS A NEW CHANCE. WHEN YOU GET SOMETHING LIKE THAT IT'S A GOOD THING TO HAVE A PERSON THAT HAS A NEW CHANCE. WHOEVER WAS AROUND THERE --

KERNEN: IT'S CONFLICTING.

BUFFETT: IS IN TROUBLE.

GILBERT: WELCOME TO THE JOB.

QUICK: THIS HAS TO BE A HUGE ISSUE YOU'RE WATCHING WITH DETROIT, TOO.

GILBERT: NO QUESTION ABOUT IT. AGAIN, I DON'T KNOW ALL THE DETAILS. WE'RE ALL GOING TO FIND OUT. I THINK OVERALL THE BIG CAR COMPANIES IN THE UNITED STATES, INNOVATION IS THE CRITICAL THING AND UNLEASHING, YOU KNOW, THE INNOVATION TO BE COMPETITIVE IN THIS WORLD. CARS ARE TECHNOLOGY ON WHEELS NOW. WE NOTICE SOME OF THE ANNOUNCEMENTS THE CAR COMPANY MAKES NOW HAPPEN IN TECHNOLOGY CONFERENCES VERSUS MAYBE IN DETROIT AT THE AUTO SHOWS AND THE CAR SHOWS. I THINK HOLDING THEMSELVES OUT AS BEING TECHNOLOGY COMPANIES, EMBRACING THAT, MAKING SURE THEIR PEOPLE ARE ABLE TO INNOVATE AND CREATE AND MAKE MISTAKES FOR THE LONG TERM, I THINK CULTURALLY THAT'S THE BIGGEST THING. GENERAL MOTORS IS OBVIOUSLY DOING PRETTY GOOD. THE RENAISSANCE CENTER WHERE THEY ARE IS FULL. TO MAINTAIN COMPETITIVENESS IN THIS WORLD, THEY HAVE TO BE INNOVATIVE AND THEY HAVE TO LET THEIR PEOPLE INNOVATE.

KERNEN: NOW WE ARE GOING TO TAKE A BREAK. IS THAT OKAY?

QUICK: OKAY.

KERNEN: WE REALLY ARE. I STILL WANT TO ASK YOU SOMETHING, THOUGH. IT'S NOT ABOUT BASKETBALL. AND YOU, TOO. PLEASE STAY. I LOVE YOU, TOO. WE'LL BE RIGHT BACK.

GILBERT: I UNDERSTAND FULLY.

KERNEN: WE'LL BE RIGHT BACK WITH MORE FROM DAN GILBERT OF QUICKEN LOANS AND WARREN BUFFETT. AS WE HEAD TO BREAK

KERNEN: WE ARE BACK WITH OUR TWO SPECIAL GUESTS, QUICKEN LOANS FOUNDER AND CHAIRMAN DAN GILBERT AND WARREN BUFFETT, CHAIRMAN AND CEO OF BERKSHIRE HATHAWAY HERE WITH US. THE QUESTION I WANT TO ASK WARREN, DAN, IT WILL APPLY TO YOU, TOO. BACK TO GEITHNER'S BOOK. WE ALREADY TALKED ABOUT IT. I LOOK AT HOW WE'VE RESPONDED TO WHAT WAS REALLY FRIGHTENING. WE'VE RESPONDED REALLY BY REPLACING DEBT WITH CENTRAL BANKS BEING ABLE TO PRINT BASICALLY A LOT OF MONEY. WE'VE GONE FROM 800 BILLION HERE TO WHATEVER IT IS. 4 TRILLION.

BUFFETT: YES.

KERNEN: AND NORMALLY I WOULD THINK THE VOLCKER ERA IS COMING BACK. I GET WORRIED. A LOT OF PEOPLE HAVE THOUGHT THAT AND THEY HAVE BEEN WORRIED WITH THAT WE'VE DEBASED CURRENCIES. I'M WONDERING HOW DO YOU – HOW ARE YOU OKAY WITH THAT? IS IT IN THIS COUNTRY SINCE THE DOLLAR IS BACKED BY WHAT WE'RE ABLE TO DO ECONOMICALLY AS AN ECONOMIC FORCE, WE'RE SO INNOVATIVE AND SO MANY THINGS ARE HAPPENING, CAN WE JUSTIFY HOW MANY DOLLARS WE PRINTED AND CATCH UP WITH WHAT WE'VE DONE?

BUFFETT: PEOPLE WILL RUN TO DOLLARS. WE HAVE FOUND THAT

KERNEN: ALWAYS. NO MATTER HOW MANY WE PRINT?

BUFFETT: THE INTERESTING THING ABOUT IT IS, THE FED HAS GONE FROM A TRILLION -- A LITTLE OVER A TRILLION TO CLOSE TO 4 TRILLION. BUT THE MONEY IS SITTING THERE IN RESERVES IT HASN'T GOTTEN PUMPED INTO THE ECONOMY. WHAT YOU AND I LEARNED BACK IN ECONOMICS 101 HOW THERE WILL BE A MULTIPLIER EFFECT AND ALL OF THAT. IF THE FED STARTED PRINTING THAT YOU WOULD SEE INFLATION. THE MONEY HASN'T GONE OUT.

KERNEN: WE'RE NOT GOING TO TAKE IT BACK, ARE WE?

BUFFETT: WELL IT DOES MATURE. THE GOVERNMENTS I THINK, FOUR OR FIVE YEARS ON AVERAGE MATURITY AND THEY HAVE A TRILLION AND A FRACTION ON MORTGAGES AND THOSE ARE BEING… IT LITERALLY DON'T HAVE TO SELL IN ORDER TO RUN THE BALANCE SHEET DOWN OVER TIME. WHAT THEY'LL DO I DON'T KNOW. THE INTERESTING THING IS THAT THE BANKS ARE GETTING 25 BASIS POINTS – THEY PAY FDIC INSURANCE ON THAT, I BELIEVE. THEY DON'T MAKE ANY MONEY ON THIS STUFF THAT THEY GOT WITH THE FED. BUT THEY HAVEN'T BEEN ABLE TO GET IT OUT. THEY WANT TO GET IT OUT. I CAN TELL YOU THAT.

QUICK: WHY HAVEN'T THEY BEEN ABLE TO GET IT OUT? THEY CAN'T FIND ENOUGH PEOPLE TO LOAN IT TO?

BUFFETT: IF YOU LOOK AT, FOR EXAMPLE, YOU CAN GET FIGURES FROM SOME OF THE BANKS AS TO THE PERCENTAGE OF THE TOTAL LINES AVAILABLE THAT THEY HAVE WITH COMPANIES THAT ARE BEING USED. THOSE FIGURES, WHICH YOU WOULD

EXPECT TO TURN UP A LOT BY NOW, THEY'RE WAY DOWN TOWARD THE BOTTOM.

GILBERT: THEY'RE NOT ALLOWED IN ESSENCE TO LEND TO SMALL BUSINESSES LIKE THEY USED TO BE ABLE TO. THE UNDERWRITING GUIDELINES AND THE STANDARDS HAVE GONE IT'S AN OVERREACTION. YOU TALK TO ANY BANKER, YOU KNOW, WE JUST CAN'T. THE REGULATORS ARE NOT GOING TO ALLOW US TO GET AWAY WITH THIS, WHETHER IT'S A BIG BANK OR SMALL BANK. YOU'RE SEEING A WHOLE BUNCH OF COMPANIES EMERGE AT HIGH INTEREST RATES, MUCH HIGHER THAN TRADITIONAL BANKS, TAKING THE PLACE OF THAT.

QUICK: SO THAT'S THE EVIDENCE THAT THE REGULATORS IN WASHINGTON ARE MESSING UP WHAT THE FED HAS BEEN TRYING TO ORCHESTRATE BY HAVING THESE LOW RATES. IT'S WORSE THAN WASHINGTON NOT DOING ANYTHING. WASHINGTON IS ACTUALLY IMPEDING WHAT THE FED HAS BEEN TRYING TO INTRODUCE.

GILBERT: FROM WHAT I HEAR. I'VE TALKED TO SOME VERY LARGE BANK CEOs, COMMUNITY BANK GUYS, SMALL BUSINESS GUYS. WE HAVE AN INVESTMENT OR TWO ACTUALLY IN A COUPLE OF THESE COMPANIES THAT ACTUALLY STEP IN AND TAKE THE PLACE OF BANKS. SO YOU KNOW, THAT'S UNIVERSAL. THERE'S GOT TO BE A GOLDILOCKS, SOMETHING THAT MAKES SENSE.

BUFFETT: THE BIG BANKS THEY GO FOR A STRESS TEST AND SET OUT A SCENARIO AND THAT SCENARIO, HAIRCUTS, DIFFERENT THINGS AT VARIOUS AMOUNTS. BEFORE THEY CAN PAY DIVIDENDS, BEFORE THEY CAN REPURCHASE SHARES THEY HAVE TO COME UP WITH A PLAN. THAT PLAN IS SUBJECT TO THEIR OWN STRESS TEST. LAST YEAR AND THE YEAR BEFORE, I DON'T KNOW HOW THEY'RE DOING IT THIS YEAR, IT WAS A YES OR NO THING. IF YOU PUT IN A PLAN AND THEY DIDN'T LIKE IT, THEY DIDN'T SAY LET'S NEGOTIATE IT DOWN 10%. IT WAS JUST OFF THE TABLE. I WOULD TELL YOU THIS, IF YOU TAKE THE TWO BANKS I'M FAMILIAR WITH, WELLS FARGO AND U.S. BANK, THEY WOULD LOVE TO GET MORE MONEY OUT. THEY'RE NOT CONSTRAINED THAT MUCH. THEY ARE IN GOOD SHAPE. IT WOULD BE TERRIFIC NEWS AT WELLS IF THEY CAN GET ANOTHER 100 MILLION OUT. BANKS HAVE BEEN SELLING TO TRY AND GET MORE LOANS. BECAUSE THE DEPOSITS HAVE FLOWED IN. THE U.S. BANK IS THE SAME WAY. THAT'S NOT TRUE OF ALL BANKS. BUT IT IS TRUE OF THESE TWO BIG ONES.

KERNEN: THE CURRENCIES AROUND THE WORLD HAVE GONE UP FIVE, SIX-FOLD, WHATEVER IT IS. IS THAT GOOD FOR US HERE? EVERYBODY DID IT SO THE DOLLAR WILL STILL BE STRONG? OR SINCE THE WHOLE WORLD WAS SO FAR -- LIVING SO FAR AHEAD OF ITSELF WITH ITS DEBT, DID WE PLAY EVERYTHING FORWARD? HAVE WE ALREADY LIVED BEYOND OUR MEANS AND THERE'S A DAY OF RECKONING COMING?

BUFFETT: THERE'S NO DAY OF RECKONING.

KERNEN: WE'RE OKAY.

BUFFETT: WE'RE OKAY.

KERNEN: BECAUSE OF TECHNOLOGY, INNOVATION, PRODUCTIVITY? WE CAN CATCH UP

BUFFETT: JUST WALK OUT HERE INTO MANHATTAN AND IT'S NOT HOW IT LOOKED 200 YEARS AGO. WE'RE NOT SMARTER THAN THEY WERE 200 YEARS AGO WE'RE NOT WORKING HARDER WE JUST HAVE A SYSTEM THAT REALLY, REALLY WORKS. IT UNLEASHES HUMAN POTENTIAL AND IT CONTINUES TO. RIGHT NOW THERE ARE MILLIONS OF PEOPLE IN THIS COUNTRY TRYING TO THINKING ABOUT HOW TO DO SOMETHING BETTER TOMORROW THAN THEY DO TODAY SO THEY WILL LIVE BETTER.

KERNEN: WE'RE STILL WORRIED ABOUT DEFLATION THAN INFLATION STILL. IS THAT A BIGGER RISK OR WHAT ARE YOU MORE WORRIED ABOUT. YOU ARE WORRIED ABOUT SOMEDAY INFLATION WILL BE THE NEXT THING WE HAVE TO DEAL WITH.

BUFFETT: NO YOU ALWAYS HAVE TO WORRY ABOUT THAT WHEN PEOPLE HAVE THE POWER TO PRINT MONEY. WHEN POLITICIANS HAVE THE POWER TO PRINT MONEY, OF COURSE YOU TRIED TO MOVE IT TO THE CENTRAL BANK, THERE'S CERTAINLY A BIAS IN TERMS OF ALMOST ANY GOVERNING BODY IN ALMOST ANY COUNTRY TO INFLATE OVER TIME AND SOMETIMES IT GETS OUT OF CONTROL.

KERNEN: BUT IT WAS JUSTIFIED THIS TIME FROM WHAT HAPPENED?

BUFFETT: WE DIDN'T INFLATE THAT MUCH. IT REALLY HASN'T GOTTEN USED. THERE WERE ALL THESE PREDICTIONS ABOUT HOW INFLATION WAS GOING TO GO WILD AND IT JUST HASN'T HAPPENED.

GILBERT: DO YOU THINK A GOOD ECONOMY AUTOMATICALLY MEANS THAT INFLATION HAS TO BE MOVING UP? THERE SEEMS TO BE A CONNECTION NO MATTER WHAT HAPPENS. INTEREST RATES HAVE TO GO UP WHEN AN ECONOMY DOES BETTER. IS THAT NECESSARILY TRUE?

BUFFETT: WE HAVE THE CENTRAL BANK NOW THAT SAYS THEY'D LIKE TO SEE 2% A YEAR INFLATION. IF YOU -- THERE HAVE BEEN LONG PERIODS IN AMERICAN HISTORY BEFORE 1940 WHERE THE PRICE LEVEL HAS EITHER STAYED LEVEL OR FALLEN OVER THE PERIOD OF DECADES THAT USED TO BE THE GREAT ARGUMENT, BECAUSE THE GUYS IN THE WEST, THE WILLIAM JENNINGS BRYAN OF THE WORLD, THEY WANTED IT TO INFLIGHT. THEY THOUGHT THE BANKERS IN NEW YORK WERE KEEPING THAT FROM HAPPENING. IT HAS NOT BEEN STEADY INFLATION SINCE 1776 BUT IT'S BEEN RELATIVELY STEADY INFLATION SINCE WORLD WAR II.

QUICK: WARREN LET ME ASK YOU THIS THE STORY ON THE FRONT OF "THE WALL STREET JOURNAL" TODAY SAYS THERE'S A SURGE IN OIL SHIPPED BY RAIL AND THAT'S BEEN SIDE TRACKING OTHER INDUSTRIES. THEY POINT DIRECTLY TO BURLINGTON, NORTHERN, SANTA FE. THEY SAY A BIG PART OF THE PROBLEM IS BECAUSE OF BNSF, THIS CRITICAL NORTHERN STRETCH OF THE COUNTRY IT'S SHIPPING ALL THE CRUDE OIL FROM THE BAKKEN SHALE REGION, IT'S CREATED ALL THIS DEMAND BUT IT'S CREATING A PROBLEM WITH OTHER INDUSTRIES THAT CAN'T GET THEIR STUFF SHIPPED IN TIME ACROSS THE COUNTRY.

BUFFETT: IT IS CERTAINLY TRUE THAT DURING THE WINTER MONTHS THERE'S BEEN A LOT OF CONGESTION. THE BIGGEST POINT OF CONGESTION IS IN CHICAGO. THAT'S WHERE EVERYTHING COMES TOGETHER, THE EAST AND THE WEST AND ALL THE INTERCHANGE. IF YOU READ THE UNION PACIFICS, THEY GAVE A TALK A COUPLE OF DAYS AGO AND THEY TOLD ABOUT THE CONGESTION IN CHICAGO. TRAFFIC IS NOT FLOWING WELL THIS YEAR. I WOULDN'T SAY IT'S OVERWHELMINGLY BECAUSE OF THE BAKKEN. THE WEATHER HAD A LOT TO DO WITH IT.

QUICK: THEY DO SAY IT WAS EXASPERATED BY THE WEATHER.

BUFFETT: IT IS EXASPERATED NOW BY THE FACT WE WANT TO CARRY THE OIL AT LOWER SPEEDS.

KERNEN: DID YOU JUST DO IT?

QUICK: I DID IT. EXACERBATE EXACERBATED.

KERNEN: WE HAVE TO CHANGE THAT WORD.

BUFFETT: WE'RE SLOWING DOWN TRAINS, TOO. BECAUSE OF THE DANGERS THAT HAVE BEEN SHOWING UP. THE OIL HAS TURNED OUT TO BE MORE VOLATILE THAN PEOPLE THINK. UNTIL WE GET THE TANK CAR SITUATION, EVERYTHING WORKED OUT.

ONE THING YOU SHOULD KNOW, PROBABLY BECAUSE IT'S GOTTEN -- OIL, CRUDE OIL IS LESS THAN 4% OF WHAT WE CARRY. AT BURLINGTON NORTHERN. WE CARRY QUITE A BIT COMPARED TO OTHER RAILROADS. IT'S ADDED VOLUME, IMPORTANT VOLUME. IT'S STILL 4%. WE CARRY 200,000 CARS A WEEK. WE'LL HAVE LESS THAN 8,000 OF THAT WILL BE CRUDE OIL.

QUICK: WOW. IN TERMS OF WHAT YOU SEE WITH THE SHIPMENTS WITH ALL THE OTHER INDUSTRIES, WE TALK ABOUT CONCERNS WITH RETAIL, CONCERNS WITH WHETHER THEY'RE WEATHER RELATED OR NOT. DOES THAT SHOW UP IN THE SHIPMENTS ANYWHERE?

BUFFETT: WELL, ON THAT YOU HAVE TO LOOK AT THE INTERMODAL FIGURES MORE. GRAIN HAS GOTTEN PILED UP SOME. AND THAT'S BECAUSE OF DIFFICULTIES ON MOVING GOODS GENERALLY WHICH MAY BE EXACERBATED BY THE CRUDE OIL, EVEN THOUGH IT'S NOT A HUGE PART. IT GOES TO THAT NORTHERN CORRIDOR UP THERE. AND LIKE I SAY, IF IT GETS TO CHICAGO, IT'S A REAL PROBLEM. YOU HAVE TO REARRANGE, HANDING OFF TO THE CSX OR TO NORFOLK SOUTHERN, SOME OF THE CARS YOU'LL HAND OFF GO THIS WAY, SOME GO THAT WAY. WHEN IT BECOMES A MESS IN CHICAGO, IT'S A MESS.

QUICK: THE REFINANCING ACTIVITY HAS DROPPED OFF SIGNIFICANTLY. WE HEAR FROM THE BIG BANKS THAT ARE LAYING OFF PEOPLE IN THEIR MORTGAGE DEPARTMENTS AS A RESULT. HAS EVERYBODY WHO WANTED TO REFINANCE REFINANCED? OR EVERYBODY WHO'S ABLE TO QUALIFY. I KNOW THERE HAVE BEEN CHANGES IN THE REGULATION.

GILBERT: THAT'S A GREAT QUESTION. THERE'S DEFINITELY A HUGE PART OF AMERICANS WHO HAVE NOT REFINANCED AND HAVE HIGH RATES. PART OF THAT IS JUST APATHY, YOU KNOW, NOT GETTING AROUND TO IT FOR WHATEVER REASON. WE'VE SEEN THAT FOREVER. THERE'S JUST A CERTAIN AMOUNT OF PEOPLE WHO SORT OF FORGET ABOUT IT. BUT THE OTHER PART, YOU KNOW WHICH YOU MENTIONED THERE, THERE'S A TON OF PEOPLE WHO QUALIFY AND MADE THEIR PAYMENTS. A LOT OF IT, YOU HAD NO INCOME VERIFICATION WHICH TURNED OUT TO, YOU KNOW, THIS BAD WORD AND, YOU KNOW, WHY DO BANKS AND WHY DO COMPANIES DO THAT. WELL, THAT'S TRUE FOR A SECTOR OF IT. BUT THERE WAS ANOTHER SECTOR OF SELF-EMPLOYED FOLKS FOR WHATEVER REASON DIDN'T -- WEREN'T ABLE TO SHOW THE INCOME THE WAY THEY NEEDED TO, BUT 50% LOAN TO VALUES, HAVE A LOT OF CASH ASSETS IN THE BANK, HAVE GREAT CREDIT WHO CAN'T REFINANCE UNDER TODAY'S RULES. SO, YOU GET THE OVERREACTION BROAD BRUSH THAT COMES OUT AND IT'S A SHAME. BECAUSE YOU CAN STILL CAN GIVE SOMEBODY A MORTGAGE 95% LOAN TO VALUE WHO HAS JUST ONE OR TWO PAYMENTS IN THE BANK, HAS A W-2 INCOME AND QUALIFIES. BUT SOMEBODY WHO HAS A 50 LOAN TO VALUE, TONS OF CASH IN THE BANK, HIGH CREDIT SCORE, CAN'T GET THEM A LOAN.

QUICK: THEY GET LOST IN THE SHUFFLE.

GILBERT: GETS LOST.

BUFFETT: WE BOUGHT A BUNCH OF 8%, 9% FANNIE MAES MORE THAN TEN YEARS AGO AND WE HAVE A FEW HUNDRED MILLION ON THE BOOKS WE OWN AND THEY ONLY GO DOWN 20% A YEAR. YOU THINK ANYBODY WITH A 9% LOAN WOULD HAVE PAID IT AND THEY DO GOOD ON 20% A YEAR. I'D LIKE TO BUY MORE OF THEM BUT THEY TRADE VERY INFREQUENTLY BECAUSE THEY JUST DON'T GET PAID DOWN AS FAST AS THEY SHOULD.

GILBERT: ONE MISCONCEPTION BY PEOPLE. THEY THINK, OKAY, IF I'M INTO A MORTGAGE OF 30 YEARS AND I'VE GOT 9 YEARS LEFT, MY RATES, CALL IT WHATEVER, 6%, IF I REFINANCE THAT MEANS I'LL PAY AGAIN FOR 30 MORE YEARS. NO. WE HEAR THIS STILL EVERY DAY FROM PEOPLE.

KERNEN: RIGHT.

GILBERT: THAT'S JUST A SHAME. MAYBE WE HAVEN'T EDUCATED THEM AS WELL AS WE SHOULD HAVE. YOU ALWAYS LOOK AT THE RATE. THE RATE DIFFERENCE. FORGET ABOUT THE AMORIZATION. YOU CAN AMORTIZE IT THE WAY YOU WANT TO.

QUICK: 15 YEARS IF YOU WANT.

GILBERT: THAT'S RIGHT.

QUICK: WE'LL BE BACK IN A MINUTE. WHEN WE RETURN WE'LL BE WRAPPING UP THE SPECIAL HOUR WITH DAN GILBERT AND WARREN BUFFETT, AND THEY'VE BEEN TALKING THE HOUSING AND THE ECONOMY. PLUS QUICKEN LOANS BILLION DOLLAR BRACKET WARREN BUFFETT IS BACKING THE COMPETITION AND WARREN BUFFETT WILL PAY OFF IF SOMEBODY WINS THIS. THERE'S ALSO AN OFFER OF $100,000 TO EACH OF THE CONTEST'S TOP 20 MOST ACCURATE BRACKETS, NO MATTER WHAT, SOMEBODY WILL WIN SOMETHING HERE. YOU HAVE TWO PAYMENT OPTIONS IF YOU WIN, YOU'LL GET $25 MILLION A YEAR FOR 40 YEARS OR TAKE THE LUMP SUM PAYOUT $500 MILLION UP FRONT. YOU CAN ENTER ON THE QUICKEN LOANS BRACKET.COM WEBSITE THROUGH YAHOO'S FANTASY SPORTS PAGE, YOU HAVE UNTIL MARCH 20th 1:00 A.M. EASTERN TO ENTER. BY THE WAY ONLY THE FIRST 15 MILLION ENTRANTS ARE ELIGIBLE FOR THE PRIZES SO HURRY UP. WE'LL BE RIGHT BACK.

QUICK: LET'S TALK BASKETBALL AND WRAP THINGS UP WITH DAN GILBERT THE OWNER OF THE CLEVELAND CAVALIERS AND BERKSHIRE'S CHAIRMAN AND CEO, WARREN BUFFETT. ALL RIGHT GUYS JUMP BALL I DON'T KNOW ANYTHING ABOUT BASKETBALL.

KERNEN: YOU HAVE THE BLUE JAYS ON YOUR FACE THERE. DID YOU KNOW IT WAS ON YOUR FACE?

BUFFETT: YES. I PUT IT ON.

KERNEN: I WANT TO MAKE SURE. TONIGHT CREIGHTON VERSUS XAVIER, WHO ARE YOU TAKING? NEVER MIND, ALL RIGHT. HOW ABOUT CINCINNATI/UCONN TONIGHT?

BUFFETT: I KNOW WHO'S BREAD I'M EATING, SO I'LL SAY CINCINNATI.

KERNEN: THAT'S A GOOD ONE. IOWA STATE OR KANSAS TONIGHT? THAT'S A TOUGH ONE.

BUFFETT: THAT'S A TOUGH ONE. WHERE'S IT BEING PLAYED?

KERNEN: I DON'T KNOW WHERE THEY'RE PLAYING. I THINK IT'S IN KANSAS CITY. THEY'RE IN KANSAS CITY.

BUFFETT: I'LL GO WITH THE HOME TEAM YEAH.

KERNEN: AND THEN I WENT TO -- ARIZONA/COLORADO.

BUFFETT: THAT WILL BE CLOSE. YOU'LL TURN THAT ONE OFF AFTER THE FIRST HALF.

KERNEN: FOR THE TOURNAMENT ITSELF YOU WOULD GO WITH -- WOULD YOU TAKE THE FINAL FOUR AS THE NUMBER ONE SEEDS RIGHT NOW IF YOU WERE MAKING OUT A BRACKET?

BUFFETT: I TAKE CREIGHTON ALL THE WAY.

KERNEN: DAN, DO YOU KNOW?

GILBERT: I WOULD TAKE MICHIGAN STATE.

KERNEN: DEFINITELY TAKING THEM TO WIN EVERYTHING?

QUICK: EVEN IF YOU WERE TRYING TO WIN A BILLION DOLLARS?

GILBERT: I JUST HAVE TO. I JUST SORT OF HAVE TO.

QUICK: YOU DON'T NEED A BILLION DOLLARS.

BUFFETT: IF DAN WINS A BILLION DOLLARS, BELIEVE ME, THERE WILL BE A FEW GUYS THAT LOOK INTO THE ENTRIES.

QUICK: HOW DO YOU GUYS MAKE SURE NOBODY CHEATS.

BUFFETT: THAT'S A -- PEOPLE SAY HOW DO YOU PRICE THIS THING. YOU PRICE IT FOR TWO THINGS. YOU PRICE IT THAT EVERYBODY WILL GET IT RIGHT AND SECONDLY THAT SOMEBODY WILL FIGURE OUT A WAY TO BEAT THE GAME.

QUICK: TECHNOLOGY, YOU GOT HACKERS BREAKING INTO EVERYTHING.

BUFFETT: ABSOLUTELY. THERE WILL BE GUYS THAT TRY AND DO THAT.

GILBERT: THERE'S A LOT OF TECHNIQUES YOU DO BUT A LOT OF THE STUFF YOU GET OFF THE TECHNOLOGY AND YOU PUT IN DIFFERENT PARTS OF THE COUNTRY AND YOU TRY TO MATCH THEM AFTER.

BUFFETT: YEAH.

GILBERT: IN OTHER WORDS, YOU'RE PRINTING -- ALL THE BRACKETS COME OFF ONTO A DISK OR SOME OTHER HARD DRIVE, REMOVE IT.

QUICK: SO THAT IT'S NOT CONNECTED TO THE INTERNET.

GILBERT: IT'S NOT CONNECTED.

QUICK: YOU LOCK IT UP SOMEWHERE.

GILBERT: AND THERE'S TWO OR THREE AND THEY HAVE TO MATCH.

BUFFETT: THREE OF THEM HAVE TO MATCH BUT IF WE GET PAST THE FIRST 32 GAMES AND THERE ARE 200 PEOPLE LEFT, I WILL PRINT OUT ALL OF THEIR BRACKETS AND I WILL SLEEP ON THEM.

KERNEN: IS IT OKAY FOR A GREAT FRESHMAN, IF I WERE COACH "K" AND I RECRUITED PARKER FOR YEARS AND HE COMES AND PLAYS, IS THIS OKAY THE WAY IT WORKS? YOU'RE THE NBA OWNER.

GILBERT: IT REALLY IS A REAL TOUGH, TOUGH QUESTION BECAUSE YOU HAVE THE MOST UNIQUE, BEST ATHLETES IN THE WORLD WHO HAVE A SHORT WINDOW THAT THEY CAN EARN INCOME AND THIS KIND OF INCOME AND SO WHO -- THE ONE SIDE IS WHO ARE WE OR WHO IS THE COLLEGE OR THE PROS TO SAY TO THEM, AN ADULT WHO IS 18 YEARS OLD PLUS THAT THEY CAN'T EARN --

KERNEN: BECAUSE I WANT TO SEE DUKE IN THREE YEARS WHEN HE'S A SENIOR HOW GOOD DUKE COULD BE.

QUICK: HE'S NOT MAKING ANY MONEY

KERNEN: I KNOW. WHAT CAN WE DO?

BUFFETT: McDERMOTT STAYED FOR FOUR YEARS AT CREIGHTON.

KERNEN: WHY?

BUFFETT: BECAUSE HE LOVES CREIGHTON.

QUICK: BUT COULD YOU PAY COLLEGE ATHLETES SO THEY'RE NOT MISSING OUT?

GILBERT" I DON'T PERSONALLY THINK YOU CAN. I THINK IT WOULD BE REALLY TROUBLESOME PERSONALLY. BUT THE OTHER SIDE OF IT, YOU KNOW, WHAT YOU SAID, IS IT GOOD FOR THE OVERALL GAME OF COLLEGE, IS IT GOOD FOR THE OVERALL GAME IN THE PROS. THERE ARE PEOPLE IN THE PROS WHO THINK TWO OR THREE YEARS SHOULD BE THE LIMIT.I THINK THE OWNERS, I DON'T KNOW IF THEY'RE SPLIT ON IT OR NOT. THAT'S MY GUT. I THINK THE PLAYERS UNION IS DEFINITELY NOT EXTENDING IT MORE THAN ONE YEAR MANDATORY IN COLLEGE, SO IT'S A TOUGH QUESTION. I DON'T KNOW, WARREN, WHERE ARE YOU ON IT?

BUFFETT: WELL, YOU'RE THE EXPERT ON THAT. BUT I'LL GIVE JOE A TRIVIA QUESTION NOW.

KERNEN: UH-OH, I WON'T GET IT.

BUFFETT: IN 1960, AND NOW McDERMOTT HOLD X THE CREIGHTON ALL-TIME SCORING RECORD. IN 1960 WHO DO YOU THINK HELD THE ALL-TIME?

KERNEN: THE BIG "O"?

BUFFETT: NO, THIS WAS FOR CREIGHTON.

KERNEN: OH, FOR CREIGHTON.

BUFFETT: ALL-TIME SCORING RECORD?

KERNEN: OH, MY GOD. I ONLY KNOW CINCINATTI

BUFFETT: YOU KNOW THE NAME.

KERNEN: I DON'T EVEN KNOW WHO WENT TO CREIGHTON.

BUFFETT: BOB GIBSON.

KERNEN: REALLY?

BUFFETT: HE WAS THE ALL-TIME SCORING --

KERNEN: HE WENT TO A JEBY HIGH SCHOOL?

BUFFETT: AND THEN HE WENT TO PLAY FOR THE GLOBETROTTERS FOR YEARS.

KERNEN: WOW THAT IS GOOD TRIVIA. AND YOU ARE A HUGE ST. LOUIS CARDINAL FAN, TOO.

BUFFETT: YOU BET. YOU BET.

KERNEN: OKAY. WE GOT TO GO. THANK YOU. SIGN UP FOR THE BRACKETS SUNDAY NIGHT.

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