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CNBC TRANSCRIPT: Warren Buffett Warns Rescue Package Won't Be "Panacea" for Troubled Economy

Friday, 3 Oct 2008 | 8:54 PM ET

In a live telephone interview today (Friday) on CNBC'S Street Signs, Warren Buffett reacted to the House of Representative's approval of a financial rescue package.

WBW POST: WARREN BUFFETT TO CNBC - RESCUE BILL WILL HELP, BUT NOT "PANACEA" FOR ECONOMY

He also revealed the two domestic stocks that he personally owns, as opposed to the many stocks owned by his holding company, Berkshire Hathaway.

This is a complete transcript of that conversation:

ERIN BURNETT: Mr. Buffett, wonderful to have you with us. I'll just throw out the first question here and that is this. You said you wouldn't have gotten into GE or into Goldman Sachs if it weren't for this bailout deal. Now it is done. Are you looking actively to put more money to work right now or is this going to be a period of pause for you?

Buffett on the Bailout Bill
Warren Buffett shares his reaction to the House's passage of the financial bailout bill.

WARREN BUFFETT: Well, that all depends on what's available. We don't have as much money around as we had a few weeks ago, but we still have a little. It all depends on what I see and what's being offered.

BECKY QUICK: Hey Warren, I just want to jump in with this. We watched the House bill being passed today, and I know this is something you've been counting on, passage of this bill in the Congress, on several of these deals that you've done. What do you think now that the bill's actually passed?

BUFFETT: I always said that I thought in the end the Congress would do the right thing on something this important. This is not a panacea. This does not solve all our problems. It just would have been a, it would have been a total disaster if it hadn't of passed and it gives some tools to reducing the impact of this recession on the economy. But it's not a panacea.

BECKY: The market seems to agree with that. The Dow right now down by about 50 points. How much trouble, how much troubled times do you think are ahead for the nation?

BUFFETT: Well, I think frankly there's a lot -- it'll be quite awhile before unemployment bottoms out and the recession bottoms out. I don't know whether -- I don't know how long that period will be, but it's not going to turn around next week or next month. Without this, it would have plunged into something, I think, far, far worse than what we're going to see.

BECKY: Where do you think things will -- Will this loosen up the credit markets? That's what people have been watching so closely.

BUFFETT: Well, that's the key. It will certainly loosen them up. You can't believe how tight the credit markets have been. I mean the credit markets have been frozen here and it was getting worse by the day. And frankly, even waiting these two weeks to pass this bill was -- you know, it all hurts. But this will be a big help. Whether it gets the job entirely done remains to be seen.

BECKY: You know, we were all caught off guard this morning by the Wells Fargo bid to take over Wachovia. How did that come about?

BUFFETT: Well, as I understand it, there was something in the tax bill, actually, that may have been passed Monday, which, in effect, made the deal more attractive. And the Wachovia shareholders are going to get the benefit of the fact that that tax situation changed. They're going to get a lot more money than they would have gotten if that tax bill hadn't passed.

BECKY: Obviously though, Citigroup a little unhappy with how this all came out. Charlie Gasparino has been reporting today that Citigroup officials just found out about this last night at about two o'clock in the morning. They are claiming that they had the FDIC backing on some of this. Where do you see this coming down?

BUFFETT: Well, I don't know the answer to that. I don't know all the technicalities. I know it's a better deal, obviously, for the Wachovia shareholders. And I know that there is no company, there's no banking institution, during the last six months, that has done a better job for its holders, for its depositors, and for its borrowers, than Wells. Wells has been lending more and more money. They've been pumping money into the economy during the last six months while other institutions have been contracting. So I think Wells is a wonderful home for Wachovia.

BECKY: How dire of a situation do you think this was, though, for Wachovia shareholders last weekend when everyone seemed to be considering this deal at one time, Wells Fargo walked away. Did the idea that Citigroup came in that night keep the bank in operation the next day when the markets opened?

BUFFETT: Well, I think the FDIC one way or another would have kept things open. But there's no question the Wachovia situation worsened dramatically over the last few weeks. Incidentally, I think (Wachovia CEO) Bob Steel has done a good job since he came in, but he got handed an impossible hand. And like I say, fortunately this tax bill makes Wachovia more valuable and Wells has stepped up with an offer that will provide considerably more money to the Wachovia shareholders. I also -- I really do think there's no, there's no banking institution that has done a better job during this tough period than Wells. I'll tell you one interesting fact, Becky. There are only two domestic stocks that I own personally. One is Berkshire Hathaway and the other is Wells Fargo. But I've got quite a bit more of Berkshire Hathaway. (Laughs.)

BECKY: Now I know that when we talked to you about a month ago, you told us that when you were looking at the financials there was one stock you've been buying more of. People at the time -- we narrowed it down to two. We got you to admit that it was either Wells Fargo or American Express. Was it Wells Fargo?

BUFFETT: Well, now you know. Yeah, it was Wells Fargo. (Laughs.) We've added quite a bit to our holdings since the start of the year.

BECKY: Added quite a bit to Wells Fargo -- Have you added to your own personal holdings in Wells, too?

BUFFETT: Yeah, I bought -- The first domestic stock that I can remember buying, I don't know, in a decade or two. But there was a time that Wells got down into the low 20s and so I couldn't resist. I bought some myself. I keep most of my money in Treasury bonds, except for Berkshire Hathaway, but I did buy some Wells.

BECKY: OK, very quickly. Do you know if the FDIC, or Sheila Bair, or anyone else there, has spoken with officials at Wells about this deal?

BUFFETT: I really, I really don't know that. I've been attending a Fortune women's conference in San Diego where they had 250 women and I was the only man. So I've been pretty busy. (Laughs.) For a guy who couldn't get a date in high school, it's been heaven, I have to tell you.

BECKY: Erin, do you have a last question for Mr. Buffett, too?

ERIN: I'd love one more, thanks a lot, Becks. Mr. Buffett, my question was just this. Are you concerned at all that we're ending up in a system where banks that people had thought weren't that strong, and people questioned their business model, for example a Citigroup, that we're going to end up in a country where we really have three huge megabanks, and then a lot of smaller ones. Are you worried about the trend?

BUFFETT: No, well, I, no, I don't think that's a great problem. There is a lot of competition among the big banks. There's still over 8000 banks in the United States. The number will come down somewhat. But it's a plenty competitive business. So I have no worry about the fact that there's undue concentration.

ERIN: Mr. Buffett, thanks so much, and Becky, thank you very much.

Current stock prices:

Berkshire Class A:

Berkshire Class B:

General Electric:

Goldman Sachs:

Wells Fargo:

Wachovia:

Citigroup:

Questions? Comments? Email me at buffettwatch@cnbc.com

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