The US economy is in for an extended period of slow growth, but it would be worse if policy makers had not acted aggressively in September 2008, investor Warren Buffett told CNBC.
High levels of unemployment likely will persist while quantitative easing likely will have little effect except to undermine US monetary policy, the Berkshire Hathaway CEO said.
But he otherwise lavished praise on the actions the Federal Reserve, Treasury and elected officials in Washington took when Lehman Brothers collapsed two years ago and the economy teetered on the brink of another Great Depression. Buffett's comments elaborated on a "Dear Uncle Sam" thank you note printed Wednesday in the New York Times.
"There were the dominos of corporate America lined up, but there were three hundred million American dominos lined up right behind them—money market funds, 401(k)'s, jobs, income, all of those things were going to topple like no one had ever seen," Buffett said during an impromptu call-in interview. "Somebody had to stop the dominos from toppling, and government was the only one that could do it. Fortunately, they came through at that time."
In his piece for the Times, Buffett signed the note "Your grateful nephew, Warren," and noted, "Often you are wasteful, and sometimes you are bullying. On occasion you are downright maddening. But in this extraordinary emergency, you came through—and the world would look far different now if you had not."
In his CNBC interview, he said his fortunes along with those of the rest of the US would have been vastly different had government not devised a slew of liquidity programs to get money back into the financial system. He praised both President Barack Obama and his predecessor George W. Bush as well for their actions in that regard.
The Lehman Brothers collapse is often seen as a seminal point in the financial crisis because of the former Wall Street titan's systemic importance. Through its short-term financing structure and the many counterparties dependent on the firm's viability, the loss of the company reverberated through the global capital markets.
While the government's decision to let Lehman fail has drawn intense criticism, Buffett does not go there. Instead, he said policy makers found a way to guide the economy through the difficult time.
"That was the crucial point in America's financial history," he said. "That week around Lehman, if government hadn't acted then I'd be having my Thanksgiving dinner at McDonald's instead of a big turkey dinner at my daughter's."
Turning to more recent issues, Buffett repeated his often-voiced assertion that top wage earners should be paying more taxes, which he said is of particular importance now that the government is trying to plug an expected $1.3 trillion budget deficit this year.
On the Federal Reserve's program to drive down interest rates by buying Treasurys—often referred to as quantitative easing—he said "I don't think the impact will be huge" and could undermine confidence in the dollar.
But he said the economy will rebound nonetheless.
"We've come back from everything and we'll come back from this one," Buffett said. "It won't be next week or next month. The sort of cardiac arrest that the country experienced, you don't get out of the hospital in a day or a week or a month."
For investors, though, he said stocks and not bonds are the best place to be during the recovery.
"You've got to put your money someplace and I would rather have it in stocks by far than have it in short- or long-term bonds," he said. "To the extent the market moved up in the last few years I think think it was warranted. If they had not done what they did in September 2008 we would not be talking about stocks at these levels, and unemployment would be far, far higher."