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CNBC TRANSCRIPT: BILLIONAIRE INVESTOR WARREN BUFFETT, BERKSHIRE HATHAWAY CHAIRMAN & CEO, ON CNBC'S "SQUAWK BOX" TODAY

Jennifer Dauble
Tuesday, 3 Nov 2009 | 4:08 PM ET

WHEN: TODAY, TUESDAY, NOVEMBER 3RD

WHERE: CNBC'S "SQUAWK BOX"

Following is the unofficial transcript of a CNBC interview with Warren Buffett, Berkshire Hathaway Chairman & CEO, today on CNBC's "Squawk Box."

All references must be sourced to CNBC.

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KERNEN: MR. BUFFET UH-OH, HOPE FULLY -- HE CAN CALL BACK.

QUICK: SOUNDS LIKE BERKSHIRE HATHAWAY IS ALSO SPLITTING ITS CLASS B SHARES 50 FOR ONE. WARREN, ARE YOU ON THE PHONE RIGHT NOW?

BUFFETT: I'M HERE.

QUICK: FIRST OF ALL, HOW DID THIS DEAL COME APART. THIS COMES AS A HUGE SURPRISE TO ANYBODY THAT'S BEEN WATCHING IT. I KNOW YOU HAVE A HUGE STAKE IN BURLINGTON NORTHERN BUT BUYING THE WHOLE THING THAT'S A HUGE DEAL, $34 BILLION.

BUFFETT: A WEEK AGO THURSDAY THE BOARD OF DIRECTORS OF BERKSHIRE WAS MEETING IN FT. WORTH.WE DO ONE OFF SITE A YEAR, THREE SUBSIDIARIES IN FORTH WORTH, JUSTIN, BOOD AND ACME BRICK, AND TTI O WE PICK OUT A PLACE AND GO DOWN ONCE A YEAR. I WENT DOWN A COUPLE HOURS EARLY A WEEK AGO THURSDAY AND WENT OVER TO BNSF AND VISITED WITH MATT ROSEN AND HIS TOP MANAGEMENT. THEY GAVE ME KIND OF A RUN-THROUGH OF WHAT THEY WERE GOING TO DO WITH THE ANALYST THAT AFTERNOON AT 3:30. AND I SAID TO MATT, IF YOU'RE EVER LOOKING FOR A PERMANENT HOME, DON'T FORGET MY PHONE NUMBER. HE DIDN'T THROW ME OUT OF THE OFFICE. SO THE NEXT DAY WHILE WE WERE TOURING VARIOUS BUSINESSES OF BERKSHIRE I HAD MY ASSISTANT CALL AND ASK IF HE WOULD DROP BYTHE ASHTON HOTEL AT 6:00 WHEN WE GET BACK. WHEN HE DROPPED BY I MADE HIM AN OFFER. HE SAID HE WOULD TAKE IT TO HIS BOARD. TOOK ABOUT 15 MINUTES.

KERNEN: AN OFFER THAT HE COULDN'T REFUSE. YOU'RE USING STOCK.

BUFFETT: I DON'T LIKE TO USE STOCK BUT ON THIS ONE, BECAUSE OF THE SIZE AND BECAUSE THEY WANTED A TAX-FREE OPTION FOR SHAREHOLDERS WE'RE DOING 40% STOCK AND 60% CASH.

QUICK: WHAT'S THIS 50 FOR 1 SPLIT OFTHE CLASS B SHARES. WE'RE JUST READING THIS, TOO. YOU DO NOT DO STOCK SPLITS.

BUFFETT: I'M NOT BIG ON STOCK SPLITS. BUT BY HAVING THIS SPLIT, IT ENABLES ANYBODY THAT HAS AS LITTLE AS ONE SHARE OF BNSF TO OPT FOR THE TAX-FREE EXCHANGE, THE 40% PER SHARE. SO THOSE SMALL SHAREHOLDERS CAN HAVE EXACTLY THE SAME AVAILABILITY THAT OTHERWISE WOULD ONLY HAVE BEEN ABLE TO A BIG SHAREHOLDER. OUR MAIN EXCHANGE WILL BE FOR A SHARES.SINCE THE A SELLS FOR AROUND $100,000, IT MEANS ANYBODY THAT HAD LESS THAN THAT AMOUNT OF BNSF WOULD NOT HAVE THE SAME CHOICE AS A BIG SHAREHOLDER DID. WE'RE NOT SPLITTING THE A BUT WE ARE SPLITTNGTHE B 50 FOR ONE.

KERNEN: IF YOU HAD TO JUST -- THERE'S A LOT OF REASONS TO LOVE THE RAILS, I KNOW, WARREN.BUT WHAT IS IT ABOUT THE FUTURE THAT MAKES THE RAILS SO ATTRACTIVE? WE'VE GOT TO MOVE STUFF, I KNOW.IS IT BECAUSE THEY CAN DO IT IN A COST EFFECTIVE WAY?

BUFFETT: THEY DO IT IN A COST EFFECTIVE WAY AND EXTRAORDINARILY ENVIRONMENTALLY FRIENDLY WAY. BNSF LAST YEAR MOVED ON AVERAGE IT MOVED A TON OF GOODS 470 MILES ON ONE GALLON OF DIESEL. IT RELEASES FAR FEWER POLLUTANTS INTO THE ATMOSPHERE. IT SAVES ENORMOUSLY ON ENERGY CONSUMPTION AND, YOU KNOW, IT DIMINISHES HIGHWAY CONGESTION. RAILS LAST YEAR MOVED 40% -- MORE THAN 40% OVER THE COUNTRY. THEY MOVED MORE THAN ALL THOSE TRUCKS JUST THE FOUR BIG RAILROADS IT'S A VERY EFFECTIVE WAY OF MOVING GOODS. I BASICALLY BELIEVE THIS COUNTRY WILL PROSPER AND YOU'LL HAVE MORE PEOPLE MOVING MORE GOODS TEN AND 20 AND 30 YEARS FROM NOWAND THE RAILS SHOULD BENEFIT. IT'S A BET ON THE COUNTRY BASICALLY.

QUICK: YOU KNOW, WARREN, YOU STARTEDREALLY GETTING INVOLVED WITH MAKE OF THESE TRAIN STOCKS, WHATWAS IT TWO OR THREE YEARS AGO WHEN YOU STARTED BUYING STAKES IN BURLINGTON NORTHERN AND UNIONPACIFIC.

BUFFETT: UNION PACIFIC AND NORFOLK SOUTHERN.THREE YEARS AGO. I WOKE UP ABOUT FIVE YEARS LATE BUT THAT'S PRETTY GOOD FOR ME.

QUICK: WHAT HAPPENS TO YOUR STAKE IN THE OTHER TWO.

KERNEN: HE'S MAKING A HECK OF A LOT OF MONEY ON UNION PACIFIC, WARREN.COULD YOU BUY THEM, TOO.

BUFFETT: I THINK ONE RAILROAD IS ENOUGH.

KERNEN: SO YOU'RE SAYING NO FOR SURE.

BUFFETT: YEAH. NO. THERE'S ONLY TWO BIG ROADS IN THE WEST AND, UNION PACIFIC AND BNSF WILL BE COMPETITORS 50 YEARS FROM NOW.IT'S TRUE, THE SITUATION IN RAILROADS CHANGED DRAMATICALLY A DECADE OR SO AGO. RAILROADS GOT MORE EFFICIENT. RIGHT NOW YOU'VE GOT 90% MORE MOVING THAN YOU HAD 25 OR 30 YEARS AGO AND MOVING ON 40% LESS TRACK OF THE COSTS HAVE GONE DOWN AND INFLATION ADJUSTED. IT'S BECOME A MUCH MORE PRODUCTIVE INDUSTRY. I GO WAY BACK. I WENT TO THE ILLINOIS TERMINAL HEARINGS BEFORE THE ICC 50 YEARS AGO. I USED TO OWN SOMETHING CALLED GREEN BAY AND WESTERN, GB & W, GRAB BAGGAGE AND WALK.

QUICK: WARREN, OUR GUEST HOST TODAY IS GOVERNOR ED RENDELL FROM PENNSYLVANIA.HE'S GOT A LOT OF RAILROADS IN HIS STATE, TOO.

BUFFETT: GOOD. I HOPE YOU ORIGINATE A LOT OF TRAFFIC THAT GETS TRANSFERRED.

RENDELL: YOU KNOW, I WAS JUST TELLING BECKY AND JOE WE HAD AN ANNOUNCEMENT WITH NS ABOUT THE CRESCENT CORRIDOR PROJECT, WHICH I KNOW YOU'RE AWARE OF, FIVE-STATE PROJECT, PENNSYLVANIA THROWING IN $45 MILLION DOLLARS TO MATCH A $60 MILLION DOLLAR FEDERAL INVESTMENT AND A 100 MILLION DOLLAR INVESTMENT BY NS. WE'RE THE BIGGEST BENEFICIARY OF THE CRESCENT CORRIDOR IT'S GOING TO CREATE BETWEEN 1,000 AND 2,000 JOBS. I'M A GREAT BELIEVER IN FREIGHT RAIL. WE HAVE 67 SHORT LINES THAT CONNECT TO FOUR CLASS As AND GIVES US A GREAT COMPETITIVE ADVANTAGE. IT'S AN ALTERNATIVE THAT KEEPS PRICES DOWN FOR GOODS MOVING OF THAT'S WHAT THIS COUNTRY NEEDS. IT IS A BET ON THE COUNTRY, MR. BUFFET.IT'S A GOOD BET AND WE NEED ENTREPRENEURS TO CARE ABOUT THIS COUNTRY AGAIN.

BUFFETT: YOU AND I ARE BOTH RAIL FANS.IT MOVES GOODS MORE EFFICIENTLY THAN OVER THE ROADS. OVER TIME I THINK YOU'LL SEE MORE AND MORE TON MILES MOVING ON THE RAILROADS.

KERNEN: YOU SAID SO. THIS IS YOUR QUOTE. AN ALL IN BET ON THE FUTURE OF THE UNITED STATES.

BUFFETT: THAT'S WHAT IT IS. THAT'S WHAT IT IS.

KERNEN: I FEEL LIKE STANDING UP WHEN I SAY THAT.

BUFFETT: DON'T SING THE STAR SPANGLED BANNER, JOE.

KERNEN: I DO BECAUSE IT'S YOU AND THE RAILS AND EVERYTHING ELSE. COMMENT QUICKLY ON WHERE WE ARE RIGHT NOW.WE ALWAYS GET A SNAPSHOT OF HOW YOU FEEL. WHO KNOWS BETTER ABOUT BUSINESS GLOBALLY THAN YOU. HOW IS BERKSHIRE HATHAWAY'S MYRIAD BUSINESSES DOING COMPARED TO SIX MONTHS AGO.

BUFFETT: THEY MIGHT BE DOING A TICK BETTER. FORTUNATELY TWO BIG BUSINESSES, INSURANCE AND UTILITY BUSINESSESAREN'T REALLY AFFECTED THAT MUCH BY THE RECESSION. BUT MOST OF OUR BUSINESSES ARE STILL FEELING SEVERE AFFECTS FROM THE RECESSION.THEY ARE NOT GOING DOWN. IT'S STABILIZED. THERE'S NOT THIS FEAR THAT WAS PREVALENT EIGHT OR TEN MONTHS AGO BUT BUSINESS HAS NOT BOUNCEDVERY MUCH. IT WILL. I DON'T KNOW WHEN BUT IT WILL. WE WOULDN'T BE PUTTING OUT THE EQUIVALENT OF $34 BILLION UNLESS I FELT THERE'S A LOT OF GOOD YEARS FOR AMERICA. AMERICA'S BEST YEARS LIE AHEAD.THERE'S NO QUESTION ABOUT THAT.

QUICK: WARREN, WHEN WE SPOKE WITH YOU I GUESS ABOUT FOUR OR SIX WEEKS AGO, YOU MENTIONED YOU HAVE SEEN SOME TURNS WHEN YOU LOOK AT SOME OF THE REAL ESTATE. IS THAT STILL THE CASE?

BUFFETT: RESIDENTIAL REAL ESTATE HAS IMPROVED. IT LEVELED OFF IN MOST AREAS -- NOW, IT'S A LOCAL MARKET.WHAT REALLY IS HELPING RESIDENTIAL REAL ESTATE FRANKLY WE HAVEN'T BEEN BUILDING VERY MANY HOUSES.WE KEEP FORMING HOUSEHOLDS, THATSTOPS UP EXCESS INVENTORY. PLACES LIKE CALIFORNIA WE'VE SEEN A STABILIZATION IN THE LOWER END AND MEDIUM END. THE HIGH END THAT'S NOT TRUE. FOR MOST HOUSING IN THE LOW TO MEDIUM PRICE RANGE, I THINK THERE'S NO QUESTION THAT IT'S STABILIZED. THAT'S VERY IMPORTANT. COMMERCIAL REAL ESTATE IS ANOTHER STORY.

QUICK: BACK TO THE BURLINGTON NORTHERN DEAL. THE IDEA THAT YOU'RE PUTTING OUT THIS MUCH CASH, WHERE IS THAT GOING TO LEAVE YOU IN TERMS OF HOW MUCH CASH YOU HAVE BACK AT HOME. YOU'RE SOMEBODY WHO FEELS VERY SAFE WITH HAVING A BIG LOAD OF CASH ON THE BOOKS AT ALL TIMES TO PROTECT YOU AGAINST ANYTHING. WHERE DOES THIS LEAVE YOU?

BUFFETT: CASH MAKES ME COMFORTABLE.WE'RE USING -- OF THE $16 BILLION IN CASH REQUIRED WE'LL BORROW $8 BILLION BUT WE'LL BORROW FROM THE BANKS AND PAY IT BACK PROMPTLY. WE'LL USE $8 BILLION OF OUR OWN CASH. AFTER DOING IT WE WILL BE LEFT WITH OVER $20 BILLION OF CONSOLIDATED CASH. WE LIKE TO HAVE A LOT OF CASH AROUND.WE'LL HAVE A LOT OF CASH AROUND STRAIGHT THROUGH THIS. BUT WE WILL BORROW $8 BILLION WHICH WE'LL PAY BACK IN THREE ANNUAL INSTALLMENTS.

QUICK: DOES THAT MEAN YOUR DEAL MAKING IS DONE FOR A WHILE?YOU'VE BEEN ON QUITE A SPREE OVER THE LAST FEW YEARS.

BUFFETT: WE WON'T BE MAKING ANYMORE 34 BILLION DOLLAR DEALS BUT NO, IT DOESN'T MEAN WE'RE OUT OF BUSINESS BUT IT DOES MEAN THAT WE WON'T BE MAKING ANY HUGE DEALS FOR A WHILE.

KERNEN: WARREN, YOU CAN BORROW MONEY FROM THIS BANK PRETTY EASILY. DO YOU HAVE A FEEL FOR WHETHER IT'S GETTING EASIER FOR SMALL BUSINESSES TO DO THINGS ESPECIALLY AFTER CIT THIS WEEK?

BUFFETT: NO.THE BANKS I'M FAMILIAR WITH ARE LOOKING FOR LOANS. THEY ARE ACTUALLY -- I WAS TALKING TO ONE VERY LARGE BANK.THEY WOULD LIKE TO SEE MORE LOANS. BUT A RECESSION TENDS TO DAMPEN THE DEMAND FOR LOANS.OF COURSE IF YOU LOAN A FELLOW -- IF YOU MAKE A MORTGAGE ON A HOUSE THAT USED TO MAKE FOR $500,000, BECAUSE OF THE DIMINISHED VALUE OF THE HOUSE YOU'RE PROBABLY ONLY LENDING $300,000. THE DOLLAR VALUE ALONE DOES GO DOWN IN A RECESSION.I MEAN, IT ALWAYS DOES THAT. BUT MONEY IS FALLING.WHERE A LOAN MAKES SENSE, YOU GET IT.

KERNEN: I WANT TO QUICKLY ASK YOU ABOUT -- I HAVE TO DO THIS.THE DOLLAR -- WHAT HAS HAPPENED TO THE DOLLAR HELP BERKSHIRE HATHAWAY BUSINESSES ARE YOU OKAY WITH WHAT APPEARS TO BE A LAISSEZ-FAIRE ATTITUDE THE ADMINISTRATION OR THE GOVERNMENT APPEARS TO HAVE ABOUT THE DOLLAR? IS THAT A POSITIVE FOR US OR IS IT TIME TO SAY ENOUGH IS ENOUGH?

BUFFETT: I THINK IT'S A SYMPTOM OF OTHER THINGS THAT ARE GOING ON. I MEAN, IT CERTAINLY -- OUR FISCAL DEFICIT WILL ENTER INTO HOW THE DOLLAR BEHAVES OVER TIME. IN TERMS OF HOW IT AFFECTS BERKSHIRE, SOME THINGS HELP LIKE OUR COCA-COLA INVESTMENT, SOMETHING OF THE SORT, SOME BUSINESSES THAT HURTS. IT'S KIND OF A WASH FOR US BUT NOT A GOOD THING FOR THE COUNTRYOVER TIME. BUT THAT WILL BE DETERMINED. IT'S WHAT HAPPENS IN WASHINGTON. YOU CAN'T PEG CURRENCY AS FUNDAMENTALS OR PULLING IN ANOTHER DIRECTION.

QUICK: YOU KNOW, WARREN, ANOTHER THING OBVIOUSLY BERKSHIRE HAS HUGE EXPOSURE TO IS ANY SORT OF CATASTROPHIC LOSSES.WE HAVE NOT SEEN CATASTROPHIC LOSSES FOR INSURERS OR ANY BIG STORMS THAT HAVE HIT OVER THE LAST SEVERAL YEARS. WHAT'S YOUR FEELING ON HOW LIKELY WE ARE TO FACE THOSE KINDS OF STORMS AGAIN.

BUFFETT: YOU NEVER KNOW BUT WE'VE REDUCED OUR -- WE'RE STILL BIG WRITER OF INSURANCE BUT WE'VE REDUCED MAXIMUM EXPOSURE TO EARTHQUAKES AND WIND STORMS BY PROBABLY MORE THAN 50% OVER THE LAST COUPLE OF YEARS. WE'LL KEEP IT LOW -- A, WE DON'T LIKE THE PRICES. B, I JUST FELT IN TERMS OF RISK EXPOSURES I WANTED TO BE DOING THINGS IN OTHER ARENAS, THEREFORE I TAKE DOWN THE RISK IN THE CAT AREA AND REVVED UP A LITTLE BIT IN TERMS OF MAKING INVESTMENTS INCLUDING THIS RECENT ONE. I TRY TO BALANCE OUT RISKS, PHYSICAL RISKS WITH FINANCIAL RISKS.

KERNEN: I'M BRINGING UP AN UNPLEASANT SUBJECT -- NO, I'M KIDDING.YOU'RE GOING TO LIKE THIS.I KNOW YOU'LL SMILE WHEN YOU ANSWER.WHERE WERE THE WARRANTS ON GOLDMAN WAS IT 115.

BUFFETT: YEAH 115 $5 BILLION A STOCK AT 115.

KERNEN: I MEAN, THAT IS JUST -- ANYWAY THAT'S AT 169. I'M LEADING TO SOMETHING, WARREN. IT'S 169 NOW. DO YOU GET THE FEELING THAT THE FINANCIAL SYSTEM RIGHT NOW IS NOT AS LEVERAGED AS IT WAS? DO WE NEED TO FIX IT NOW? THERE'S PEOPLE THAT SAY WE'RE JUST AS -- IN AS PERILOUS A CONDITION AS WE WERE BEFORE EVERYTHING HAPPENED?

BUFFETT: THAT'S NOT TRUE, JOE. I CAN'T SPEAK FOR EVERY FIRM. A LOT HAS BEEN ACCOMPLISHED IN THE LAST YEAR. I GIVE ENORMOUS CREDIT TO WHAT BERNANKE AND PAULSON DID. IF THEY HADN'T JUMPED IN ON COMMERCIAL PAPER AND GUARENTEED THE MONEY MARKET FUNDS YOU AND I WOULD BE COMMUNICATING BY SMOKE SIGNALS. I WOULDN'T BE ABLE TO AFFORD A PHONE. WE WERE RIGHT AT THE BRINK A YEAR AGO BUT A LOT HAS BEEN CORRECTED AND THE SYSTEM HAS BEEN CHANGED IN A MATERIAL WAY.

KERNEN: WHAT WOULD YOU SAY ABOUT PAYING OUT HUGE BONUSES AT GOLDMAN?ARE YOU OKAY WITH THAT AS A HUGE SHAREHOLDER?

BUFFETT: AS A FUTURE SHAREHOLDER, WE'RE A WARRANT HOLDER NOW, MORECOMING FROM US THAN ANYBODY ELSE IN THE WHOLE WORLD. PEOPLE EARN A LOT OF MONEY FOR SHAREHOLDERS, I HAVE NO PROBLEM PAYING THEM. WHAT I DON'T LIKE IS PAY FOR NON-PERFORMANCE.I LOVE PAY FOR PERFORMANCE. IT'S SOMETHING WE DO AT BERKSHIRE AND I HAVE NO QUARREL WITH THAT.

RENDELL: THIS IS GOVERNOR RENDELL. I THINK WHAT REALLY GALLS THE AMERICAN PEOPLE EXECUTIVE PAY ONWALL STREET DOESN'T SEEM TO BE PEGGED TO PERFORMANCE. IF A COMPANY DOES WELL EXECUTIVES SHOULD GET A BONUS. IF IT DOESN'T DO WELL, THEY SHOULDN'T, SHOULDN'T GET GOLDEN PARACHUTES OUT. LIKE THE COMMERCIAL THAT'S GOING ON NOW MY BROKER MAKES MONEY WHEN I MAKE MONEY. YEAH BUT HE ALSO MAKES MONEY WITH I LOST MONEY AND THAT'S WHAT GALLS THE AMERICAN PEOPLE

BUFFETT: I HATE TO PAY ANYTHING TO A GUY WHO BATS 200, 350 I'LL PAY A LOT TO. STEVE GREENBERG USED TO BE THE SON OF HANK GREENBERG WAS A PLAYER'S AGENT AND ONE TIME REPRESENTING A CENTER FIELDER ASKED HIS DAD HANK GREENBERG, HOW MUCH SHOULD I ASK FOR A SIGNING BONUS, HANK SAID, WHAT DID HE BAT LAST YEAR. STEVE SAID 240. HANK SAID ASK FOR A UNIFORM. THAT'S WHAT I FEEL YOU SHOULD GIVE THESE GUYS THAT REALLY KILLED THEIR FIRM. GIVE THEM A UNIFORM AND SEND THEM HOME.

KERNEN: WE HAVE A PROBLEM WITH THE NOTION MORAL HAZARD IS EVERYWHERE NOW BASED ON THE WAY WE HANDLED THIS. SOMEONE ELSE MIGHT SAY LOOK WHATHAPPENED TO THE CEOs AND SHAREHOLDERS OF LEHMAN OR A LOT OF THESE INSTITUTIONS. IS THAT A PROBLEM WITH WHAT WE'VE DONE AND HAVE WE DAMAGED CAPITALISM PERMANENTLY.

BUFFETT: I DON'T THINK MORAL HAZARD. IF YOU TAKE THE BIG FIRMS, IF YOU TAKE CITIGROUP, B OF A, LEHMAN, FREDDIE MACK, FANNIE MAE, SHAREHOLDERS OF THOSE COMPANIES LOST 60 TO 65% TO 90% PLUS AIG OF THEIR INVESTMENTS. I DON'T THINK THOSE PEOPLE THINKTHEIR EQUITY INVESTMENTS ARE RISK-FREE OR ANYBODY THAT INVESTS IN FINANCIAL INSTITUTIONS HAS ANY IDEA THEIR EQUITY INVESTMENTS ARE RISK-FREE.THE BOND HOLDERS MAY FEEL THEY HAVE A PASS. PREFERRED SHAREHOLDERS AT FREDDIE AND FANNIE UNDER SUPERVISION OF CONGRESS THEY GOT TOTALLY CREAMED. I THINK PERFORMED HOLDER AT BEAR STEARNS. SO I THINK FRANKLY THE MORAL HAZARD ARGUMENT HAS BEEN OVERDONE AT LEAST IN RESPECT TO EQUITY HOLDERS. AS AN EQUITY HOLDER OF WELLS FARGO OR M AND T BANK OR U.S. BANK AS WE ARE AT BERKSHIRE I HAVE NO FEELING MY COMMON STOCK INVESTMENT IS ANY WAY PROTECTED BY ANY GOVERNMENT DOCTRINETHERE IS NO MORAL HAZARD WITH US IN TERMS OF EQUITY HOLDING.

QUICK: WARREN YOUR $34 BILLION DEAL IS THE LARGEST BERKSHIRE HATHAWAY HAS EVER COMPLETED A DAY AFTER DAVID CARR OF THE "NEWYORK TIMES" SAYS BUSINESS NEWS ISN'T ALL THAT INTERESTING ANYMORE. BORED?WHAT ABOUT YOU?WHAT DO YOU THINK ABOUT THE FUTURE OF BUSINESS AND BUSINESS NEWS?

BUFFETT: OUR SYSTEM HAS JUST GOTTEN STARTED. WE'VE HAD, YOU KNOW, A COUPLE HUNDRED YEARS OF PROGRESS BUT WE HAVE NOT EXHAUSTED OUR POTENTIAL IN THIS COUNTRY. SO AMERICA IS ABOUT BUSINESS. AND BUSINESS IN AMERICA, YOU KNOW, GONE TO GREATNESS HAND IN HAND. YOU DO NOT NEED TO WORRY ABOUT CNBC 10 OR 20 YEARS FROM NOW. BUSINESS WILL ALWAYS BE IMPORTANT TO THE AMERICAN PUBLIC.

QUICK: YOU'RE SOMEBODY THAT HAS BIG STAKES IN MEDIA COMPANIES LIKE WASHINGTON POST.YOU OWN A NEWSPAPER, THE BUFFALO, WHAT DO YOU THINK ABOUTTHE FUTURE OF NEWSPAPERS AS WELL.

BUFFETT: NEWSPAPERS HAVE A TERRIBLE FUTURE.WE OWN THE BUFFALO NEWS AS YOU SAY AND WE HOPE TO BE THE LAST MAN STANDING.I WOULD SAY WE MIGHT VERY WELL BE. BUT IF YOU LOOKED AT THE NEWSPAPER CIRCULATION FIGURES THAT JUST GOT PUBLISHED A COUPLEDAYS AGO, IT WAS JUST A DRAMATIC DECREASE. AND THEN THE TRUTH IS FEWER PEOPLE, YOU KNOW, ARE GOING TO BE READING NEWSPAPERS A YEAR FROM NOW AND TWO YEARS FROM NOW. THEY ARE GOING TO CONTINUE TO GET INFORMATION.EVERYBODY LOVES TO GET NEWS. THE INDISPENSABILITY OF THE PAPER HAS BEEN DIMINISHED. YOU KNOW, LIKE THE GOVERNOR, I WOULD GET MY SPORTS SCORES -- I PROBABLY READPHILADELPHIA INQUIRER, I'VE GOT THE WORLD OMAHA WORLDHERALD.NOW I CLICK ON AT NIGHT AND LOOKAT THE BOX SCORE AND PLAY BY PLAY AND EVERYTHING ELSE. IT'S CHANGED.

KERNEN: BUT YOU DON'T THINK CAPITALISM IS PERMANENTLY DAMAGED, WARREN. I CHARACTERIZE COMING TAXATION, ERA OF TAXATION, IT'S GOING TO BE RAINING TAXES. CAN THEY GO TO HIGH TO WHEREYOU'D BE CONCERNED.

BUFFETT: I RAN MONEY IN THE '60s WHEN THE TOP PERSONAL CAPITAL EARNED INCOME TAX RATE WAS 70%. I RAN MONEY WHEN THE CAPITAL GAINS RATE WAS 39.6%, AND I NEVER SAW ANYBODY LOSE INTEREST IN MAKING MONEY .CERTAINLY DIDN'T AFFECT ME, MY PARTNERS.PEOPLE PAID A LOT HIGHER TACKS IN THE PAST AND THE ECONOMY HAS DONE JUST FINE. WE HAD GREAT GAINS IN JOBS IN THE '50s AND '60s WITH TAX RATES FAR HIGHER THAN THEY WERE NOW.

KERNEN: EVERYBODY HAD DEDUCTIONS AND RICH PEOPLE HAD A WAY OF NOT PAYING TAXES.

BUFFETT: I DON'T THINK SO. I PAY PLENTY OF TAXES. THE CORPORATE TAX WAS 52% AND AMERICAN BUSINESS PROSPERED. THIS COUNTRY YOU HAVE TO HAVE SOME BALANCE BETWEEN EXPENSES AND INCOME RIGHT NOW WE HAVE THIS HUGE GAP AND ONE WAY OR ANOTHER IT HAS TO BE DIMINISHED. THIS COUNTRY HAS DONE EXTREMELY WELL WITH LOWER TAX RATES, HIGHER TAX RATES. OUR SYSTEM WORKS. IT UNLEASHES HUMAN POTENTIAL.WE CAN TAKE HIGHER TAXES.

RENDELL: WARREN, BEFORE YOU GO, I'D STILL BELIEVE LIKE YOU DO THAT THE COUNTRY IS GOING TO BOUNCE BACK.ONE THING IN THE ECONOMY THAT CONCERNS ME IS MANUFACTURING. IF WE BECOME A COUNTRY THAT DOESN'T PRODUCE ANYTHING, THAT DOESN'T MAKE ANYTHING, I THINK WE'RE IN SERIOUS LONG-TERM TROUBLE. RIGHT NOW MANUFACTURING, EVEN THOUGH IT HAD A SLIGHT UPTICK IN THE MOST RECENT REPORTS, MANUFACTURING IN THIS COUNTRY IS STAGGERING, FOREIGN COMPETITION IS HURTING IS VERY, VERY BADLY. WHAT'S YOUR PRESCRIPTION FOR GETTING AMERICAN MANUFACTURING BACK ON TRACK? I THINK, FOR EXAMPLE, WHAT THE COUNTRY NEEDS BOTH SUBSTANTIVELY AND ECONOMICALLY IS A TEN-YEAR INFRASTRUCTURE REVITALIZATION PROGRAM BECAUSE THAT WOULD KEY MANUFACTURING LIKE NOTHING ELSE WOULD. WHAT'S YOUR PRESCRIPTION FOR KEEPING AMERICA STRONG IN THE MANUFACTURING SECTOR.

BUFFETT: I AGREE ON THE INFRASTRUCTURE. I THOUGHT MORE OF THE STIMULUS FUNDS SHOULD HAVE GONE TO THAT.

RENDELL: THREE OR FOUR TIMES IN MY JUDGMENT.

BUFFETT: I AGREE WITH YOU 100%.THIS COUNTRY WILL SOLVE ITS PROBLEMS.WE'RE NOT SO GOOD AT AVOIDING PROBLEMS BUT WE'RE PRETTY GOOD AT SOLVING PROBLEMS. IN THE EARLY '80s WE THOUGHT GERMANY AND JAPAN WOULD BE EATING OUR LUNCH AND WE'D ALL JUST BE WORKING AT McDONALD'S AND CUTTING HAIR TO KEEP BUSY. WE'VE ADDED TENS OF MILLIONS OF JOBS. WE DO COME UP WITH THINGS YOU CAN'T PREDICT WE'LL HAVE A SOFTWARE INDUSTRY OR A GREAT AIRCRAFT INDUSTRY BUT THOSE THINGS COME ALONG. THE WORLD RIGHT NOW 12% OF OUR GDP GOING TO EXPORT AND 35 YEARS AGO ONLY 5% WAS.SO WE'RE MAKING MAKE THINGS THE WORLD WANTS.I AGREE WITH YOU, GOVERNOR, YOU'VE REALLY GOT -- YOU'VE GOT TO COUNT ON THE POTENTIAL OF PEOPLE THAT YOU AND I DON'T EVEN KNOW COMING UP WITH NEW THINGS TO DO THAT THE WORLD WANTS. HISTORICALLY WE'VE BEEN VERY GOOD AT THAT AND I THINK WE'LL BE GOOD AT IT IN THE FUTURE.

QUICK: WARREN, WE WANT TO THANK YOU AGAIN FOR JOINING US ON THIS MORNING.

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