Warren Buffett: In the 10 years since financial panic, we've learned we're 'all dominoes' spaced closely together

  • The 2008 crisis revealed how vulnerable the U.S. "economic machine" is to any one part failing, according to the billionaire investor.
  • Buffett says regulators did a "heroic" job in the immediate wake of the crisis, which started a decade ago this week.

The 2008 financial crisis revealed just how vulnerable the U.S. "economic machine" is to any one part failing, according to Warren Buffett.

Ten years ago this week, it wasn't just any part.

The failure occurred in the over-leveraged banking system, which was awash in toxic subprime mortgages that were packaged, and then bought and sold over and over on Wall Street as mortgage-backed securities.

The values of those mortgage-backed securities plummeted when the red-hot housing market turned and many people, who couldn't afford the home loans in the first place, started to default.

"What we all learned in that particular panic is that we're all dominoes. And we're all very close together," said the billionaire investor, whose Berkshire Hathaway made key investments Goldman Sachs and General Electric after the collapse of Lehman Brothers in 2008.

At the time, those investments, which were clearly crafted to be favorable to Buffett, were seen as a vote of confidence even as the destructive ripple effects of the banking and housing crises were only starting to take hold.

Speaking with CNBC as a part of its "Crisis on Wall Street: The Week That Shook the World" documentary, which premieres on television Wednesday night, Buffett said many Americans were left flat-footed when the crisis hit. "All they knew is they did nothing wrong and their world was falling apart."

Buffett said the pressure to fix things was "huge" on regulators, including then-Federal Reserve Chairman Ben Bernanke, then-New York Fed President Timothy Geithner, then-Treasury Secretary Hank Paulson and then-President George W. Bush.

"They did a heroic [job]," Buffett said.

The government quickly stepped in and bailed out the financial system, giving rise to the term "too big to fail" and the argument was there no other choice but to save the big banks to prevent cascading failures.

The Fed, meanwhile, starting cutting interest rates and taking extraordinary measures aimed at helping to boost the crumbling economy and nose-diving stock market, which bottomed out in March 2009.

There's been debate ever since on whether the government should have stepped in, and whether the Fed coddled the economy with near zero percent rates for too long after the crisis.

Fast-forward a decade, the current bull market in stocks last month became the longest since World War II. The Fed is in the midst of hiking rates and unwinding its $4 trillion-plus in assets that ballooned during and after the crisis. Economic growth has started to really pick up, while job gains and the unemployment rate have been heading in positive directions.

WATCH: Buffett remembers the 2008 financial crisis