CNBC INTERVIEW TRANSCRIPT & VIDEO, Part 1: Warren Buffett Explains His $5B Goldman Investment

BUFFETT: Well, I don't want to leverage up. No one wants to leverage up in this thing. So, if I could buy a hundred billion of these kinds of instruments at today's prices, and borrow non-recourse 90 billion, which I can't, but if I could do that, I would do that with the expectation of significant profit.

JOE: But the government can do that. You can't. And that's why the private sector can't, even you, can't save the system.

BUFFETT: I can't come close to it. But they have the ability to borrow. They can borrow much cheaper than I can borrow. They can borrow unlimited. They don't have covenants. They don't have -- I mean, they are in the ideal position. So, for example, if I were hiring advisers, as I talked about doing to buy these things, I would tell those advisers, 'Look it! People are buying these instruments to make 15 percent. So if you're going to charge me any fees, I'm going to defer those fees until I get rid of these instruments later on. If I don't make at least ten percent on my assets, you know, your fee goes down the drain. Because it should be a lead-pipe cinch to make 10 percent at the kind of prices that exist now. I wouldn't try to write that into the legislation. I don't think you should -- I think they should punish, in many cases, the people -- I would think they might insist on the directors of the institutions that participate in this program waiving all director's fees for a couple of years. They should, maybe, eliminate bonues. They may wish to do some of those things. I don't think you should try to write it into the instrument, though. I think that gets so damn complicated and ties people's hands. But if I were administering the program, I think I'd be fairly tough about some of those things, and I'd make sure that the advisers earned me a return that was well above my cost of borrowing before they got paid a dime.

BECKY: Would you administer the program?

JOE: Yeah, can you be on the oversight board? (Buffett laughs.) Can you be on the oversight board?

BUFFETT: I'd love to administer (laughs). I'd love to administer it for nothing, but I would really love to administer and get some kind of an override in terms of the profits, which is naturally the way Wall Street thinks. No, it's not my game to do that, but I will tell you that the buyers of the instruments these days are going to do better than the sellers. And the big buyer, if they -- they shouldn't pay any attention to the cost of these instruments to the selling institutions. They shouldn't pay any attention to the carrying value. In fact, one thing you might do, is if someone wants to sell a hundred billion of these instruments to the Treasury, let them sell two or three billion in the market and then have the Treasury match that, for what they pay. You don't want the Treasury to be a patsy. But I'll tell you, with Hank Paulson on top of it, you couldn't have any better guy to do that. The important thing is that if this program extends into the next administration is to have somebody in the next administration that has similar market savvy.

PART TWO OF THE BUFFETT TRANSCRIPT: FATEFUL ENCOUNTER AT THE WORLD'S FAIR

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