Warren Buffett appeared live on CNBC

with Becky Quick on Wednesday, June

24, 2009.

Buffett told us the economy is in a

"shambles" with no signs of a
recovery anytime soon. He also
criticized Apple for not disclosing
earlier that CEO Steve Jobs had received
a liver transplant.

This is a complete transcript of their

conversation:

BECKY QUICK: We are here at Smith & Wollensky where Warren Buffett is paying off
last year's winner for this auction. This is, right now there's another auction
underway. And this is the tenth year in a row he's been doing this. Warren, we want to
thank you very much for joining us.

WARREN BUFFETT: It's a pleasure.

BECKY: You've been doing this for 10 years, raising money for the Glide Foundation.
Why the Glide Foundation?

BUFFETT: I think it's probably as remarkable a social organization as there is in the

country, and it's run by Cecil Williams, who, for 45 years, has taken people that have
hit bottom and said, 'You're still a worthwhile individual and we're going to do what we
can for you in terms of housing, medicine, vocational training and you're going to become
the kind of person that you can become.' He believes in people and he carries it out
every day and I've never found a more effective place at lifting people from bottom.

BECKY: This year's winner, last year's winner showing up today, Zhao Danyang, who is
someone who paid 2.1 million dollars. That's a remarkable amount of money that's
out there. Last year, obviously, the markets were in a very different place than they are
this year. The auction is underway. I know the bidding goes through Sunday. (Note:
Bidding actually ends this coming Friday at 10p ET). Do you think someone can bid as
much as you saw last year?

BUFFETT: (Laughs.) Well it surprised me last year. They have qualified a number of
bidders that are good for very big figures. They make sure of that beforehand. So we'll
see what happens. (Laughs.) Two-point-one million is a pretty good number to shoot
for. I hope I don't have to leave a 10 percent tip at the end of the lunch. (Laughs.)

BECKY: The last time we sat down to talk to you was on May 4, and at that point
you told us that you think we're in an economic war right now. How much progress do
you think we've made in that war?

BUFFETT: Well, it's been pretty flat. I get figures on 70-odd businesses, a lot of them
daily. Everything that I see about the economy is that we've had no bounce. The
financial system was really where the crisis was last September and October, and that's
been surmounted and that's enormously important. But in terms of the economy
coming back, it takes a while. There were a lot of excesses to be wrung out and that
process is still underway and it looks to me like it will be underway for quite a while. In
the (Berkshire Hathaway) annual report, I said the economy would be in a shambles
this year and probably well beyond. I'm afraid that's true.

BECKY: We hear people on our air all the time who talk about the 'green shoots' that
they're seeing. Are you seeing any of those green shoots?

BUFFETT: (Laughs.) I looked. I wasn't seeing anything. I had a cataract operation on

my left eye about a month ago and I thought maybe now I'll be able to see green
shoots. We're not seeing them. Whether it's retailing, manufacturing, wherever. We
have a big utility operation. Industrial demand is down like we've never seen it for a
simple thing like electricity. So it hasn't happened yet. It will happen. I want to
emphasize that. But it hasn't happened yet.

BECKY: Earlier this year you

also told us that you think
Washington and the Obama
administration should be paying
attention to jobs, that's the
number one, jobs and the
economy is the number one, the
number two, and the number
three job that they should be
doing. Has there been progress
made at all on that front?

BUFFETT: Well, they're doing

thing but they take awhile to
have an effect. They're doing
things on a lot of fronts. But you
can't produce a baby in one month by getting nine women pregnant, you know.
(Laughs.) It just doesn't work that way. So you can be throwing things at the economy
and they will have an impact, but they haven't had much impact yet. And unemployment
will go high and it will lag the turn up of the economy.

BECKY: But has Washington done enough that you think they can turn their sights to
other problems that exist?

BUFFETT: Well, they've turned their sights to other problems, but this problem is not
yet solved. And it's the most important problem we have.

BECKY: It continues to be? You don't think any of the urgency has come away?

BUFFETT: No, I don't think the urgency has come away. The urgency has moved away
from a total meltdown of the financial sector which we faced last fall. I've never seen
anything like that. But I would give enormous credit to the people there. (Federal
Reserve Chairman) Bernanke did a fabulous job. We were right at the point where
people lost faith in money-market funds, when commercial paper stopped being issued.
People would be having a problem meeting their payroll, very big companies, if that
hadn't gotten addressed very quickly. And I give credit to people for doing that. So that
part, we've moved past that particular period. We haven't got the economy going again.
BECKY: You mentioned that you think Ben Bernanke did a good job. Today is an FOMC
meeting day. We're going to be hearing more about that at 2:15 today. Do you think
Ben Bernanke should be reappointed to a second term?

BUFFETT: I don't see how you could do better. Yeah. He has taken decisive action at a
time when really decisive action was needed, and extraordinary action, things that we
hadn't done before. If he hadn't of done -- I give the Bush administration credit on
this. (Former Treasury Secretary) Hank Paulson. They don't do everything perfectly.
Nobody does. And we were getting balls thrown at your head by the hour. You're going
to make some mistakes. But they got us through a period that, if we had different
people in those jobs, I'm not so sure we would have gotten through.

BECKY: Well now you do have different people on those jobs. You have (National
Economic Council Director) Larry Summers, who is advising the president. You have
(Treasury Secretary) Tim Geithner who's there. You have Ben Bernanke. What do you
think of the troika today?

BUFFETT: I think you've got

three very, the people you
named are very, very good. And
I think Bernanke is very much
the key. The Fed came through
for us.

BECKY: You haven't

commented since the Obama
administration rolled out these
new regulatory overhaul plans
that they've been looking at.
What do you think overall about it? There's a consumer protection agency that's involved
with this. There's a lot of other different arenas. But is this the right, is this a step in the
right direction?

BUFFETT: We'll see how the statute reads. But basically we got way overleveraged in
the financial arena. And the American public got overleveraged too. We do need
something to address that. We do need something to address institutions where the
wrong incentives are in place so that their personal incentives are at real variance with
what our national incentives should be. We need something to make sure we don't get
into the situation again that we were in last September. And leverage is a big key to it.
Now that's a huge problem to attack and how it's written and how it's administered is not
an easy job.

BECKY: Can you lay that down as a rule? Should it be that you can't be levered more
than 10-to-1? You can't be leveraged up more than 20-to-1? How do you figure out?

BUFFETT: And it's very difficult. And you can't lay down a rule like that, unfortunately.
Because just through derivatives you can have an enormous amount of leverage that
doesn't show and you can have an inter-connectedness that causes one domino to hit the
next. It is not a simple problem. You don't just write down leverage of 10 or 20 to one
or something of the sort. There's all kinds of different leverage. You can leverage
against home mortgages with big down payments and that will be relatively safe. You
can leverage against somebody else who's leveraged and you've got troubles getting
compounded. So it's not a simple problem but it is an important problem.

BECKY: Is it one that can be tackled? Is there a solution, a potential solution?

BUFFETT: It's not easy. It's not easy. You need somebody - you need reasonable
rules, and you need a very, very good administrator or group of administrators doing it.
It's not an easy problem. People like to go to excesses. And the incentives are, in a
market system, to overshoot. And it's happened over the years. America's genius has
not been in avoiding problems, it's been in surmounting them once they happen. And
fortunately, you know, we've come through again on that.

BECKY: So you're not saying it's an impossible task but it doesn't sound like you're very
hopeful we can prevent something like this from happening again?

BUFFETT: I think that what started out with a tulip, maybe four-hundred years ago,
and continued through the South Sea Bubble and all of those sorts of things, it's in
human nature to go to excess. And it's very hard, in a country of 300-million people and
a 14-trillion dollar GDP and all of that, to set up a set of rules that will prevent excesses
in a market system. But I think there can be improvements made and I think that's what
we're shooting for.

BECKY: When we sat down with you here last year, you said inflation was a very big
worry for you. What do you see today? Do you worry about inflation or deflation?

BUFFETT: Well, I don't worry about deflation at all. We won't see deflation in any
significant amount in your lifetime, which is more relevant than my lifetime. We've taken
action in fighting the economic war that we face that certainly sows the seeds of
substantial inflation down the road. Not in the next six months or year or two years, but
we have done things that raise the probability of really high rates of inflation at some
point. We're flooding the system with dollars. We're monitizing debt. We're doing all
the things that lead to that. Now those are appropriate things to do. Our economy was
like a fellow going down in quicksand last September and up to his shoulders, and
somebody tosses a rope. You can tie it around and yank him out with a truck, you may
dislocate a couple of shoulders but it's still pays to get him out. And we may dislocate
the economy in certain ways. There's really no choice. But we could see a lot of
inflation.

BECKY: You mentioned that the financial system was in tatters just last year. It's
turned around quite a bit. In fact, some of the big banks have been paying back TARP
money, or have made plans to pay back that TARP money. One of your big investments,
though, Wells Fargo, has not. Does that put Wells Fargo at a disadvantage?

BUFFETT: Well, it doesn't put them at a disadvantage with the person on the street
that's putting in deposits. And they've got the widest spreads, really, in terms of interest
income of anybody. But I'm sure they would like to get out of TARP. There's been
unanimity among the people in the TARP plan that they want to get out as fast as
possible, so I'm sure they'd like to get out at Wells. But from my standpoint, the
earning power of Wells is dramatic with or without the TARP money.

BECKY: So, with or without, it doesn't matter to you as an investor?

BUFFETT: It doesn't really, no, no. I wish they didn't have the warrants outstanding
that came with the TARP money because that's a call on the future profits of it, but the
government set the terms on it. They just signed a blank piece of paper.

BECKY: Over the last few days, Steve Jobs and Apple's board have gotten a lot of
attention because of the disclosure, or lack of disclosure of the liver transplant that he
had while he was out. You're someone who has also gotten some criticism about your
succession plans. What do you think about how the Apple board went about it and do
you think that criticism
there has been fair?

BUFFETT: Well, I think

it probably has. I think if
I have any serious
illness, or something
coming up of an
important nature, an
operation or anything
like that, I think the
thing to do is just tell the
American, the Berkshire
shareholders about it. I
work for 'em. Some
people might think I'm
important to the company. Certainly Steve Jobs is important to Apple. So it's a material
fact. Whether he is facing serious surgery or not is a material fact. Whether I'm facing
serious surgery is a material fact. Whether (General Electric CEO) Jeff Immelt is, I mean,
so I think that's important to get out. They're going to find out about it anyway so I
don't see a big privacy issue or anything of the sort.

BECKY: Just this past week, the Class B shares of Berkshire were able to start
trading options on them. What happened? Why did you do that and what's it mean?

BUFFETT: They didn't ask me.

BECKY: What does it mean for the stock though?

BUFFETT: Well, it means people can speculate on it instead of invest in it and I'm
basically not for it. We have the lowest turnover of any stock in the New York Stock
Exchange by far. We've got more real owners. People buy our stock to own a piece of
the business. The people that buy puts or calls, or sell puts or calls, are just betting on
what it's going to do in the short term. So it's no plus to us. It is no big minus either. I
don't think there will be a lot of trading in it.

BECKY: It doesn't bother you?

BUFFETT: No. If I had my choice it wouldn't happen, but it doesn't bother me.

BECKY: You know, cap and trade is something we talked about when we spoke with
you back in May as well. And you raised some of the issues and concerns you have about
cap and trade. It does look like it is still on the agenda for right now. So is health care.
Does it concern you to see Washington, Congress and the administration, moving on
some of these big initiatives while you're still concerned about the economy?

BUFFETT: Well, I think if they're important issues and they get well thought out
solutions. It is important that we move on carbon emissions. It's important we move on
health care. But I don't think they should be jammed through in a hurry. But those are
issues that should be addressed by America. But I do think the economy is number one.

BECKY: You said you didn't like cap and trade especially in this economy though,
because it puts a tax on people.

BUFFETT: I think if you get into the way it was written, it's a huge tax and there's no
sense calling it anything else. I mean, it is a tax. And it's a fairly regressive tax. If we
buy permits, essentially, at our utilities, that goes right into the bills of the utility
customers and an awful lot of people in Iowa, in Oregon, and Utah, and places where we
are, very poor people are going to pay a lot more money for electricity. So I think that
can be improved.

BECKY: And finally, the last question. You've written about the economy and where you
see the stock market in the past. You wrote an op-ed for the New York Times. How
are your thoughts on where the stock market stands right now compared to where you
saw it then?

BUFFETT: Well, I think it's attractive over the next ten years compared to alternatives.
If your alternative is buying some fixed-dollar investment, I think inflation will eat away
at that. I think it's almost certain over a ten-year period that equities will do better than
fixed-dollar investments. So, if people are keeping their money in cash and getting
virtually nothing for it they may feel comfortable, but it will be very expensive for them
over time.