warren buffett

CNBC’s Becky Quick is joined by Warren Buffett, chairman and CEO of Berkshire Hathaway, and Brian Moynihan, president and CEO of Bank of America, to discuss the Fed’s decision to keep intact the bond buying program. Buffett explains why he didn’t have any “great expectations” on whether the Fed would taper or not. And Moynihan feels the “economy is very constructive.”

Transcript:

meanwhile, banks and billionaires are feeling the impact of the fed’s taper te sigs or nondecision, depending on your point of view. two men listening intently to fed chair ben bear nank’s words yesterday, bank of america chairman brian moynihan and billionaire investor warren buffett. they were in the nation’scapital today. our colleague, becky quick, caught up with them both. becky, over to you. reporter: maria, thank you very much.thank you for joining us today. here with brian moynihan andwarren buffett. i know you gentlemen are here because you’re going to be speaking to about 700 people just after this. we want to thank you for joining us in advance. there has been an awful lot of news. an awful lot of surprise about what happened with the federal reserve. warren, i just want to wonder, it took us by surprise. did this catch you by surprise that the fed decided not to taper? only because i’ve been reading every place people expected something. but i don’t have any — i didn’t have any great expectations one way or the other. and it doesn’t really make any difference to me in terms of our business or investments whether it’s zero or 10 billion or 20 billion. some day it’ll stop. maybe it’ll go the other direction. although you had been ingtelling us for a while you didn’t think qe-3 was as effective as some of the earlier programs. i think that’s right.probably why it’s being continued. it hasn’t done the job yet thatthey they hoped it would. but it — i don’t think it’s been harmful.what you see in the economy is just this gradual increase,which has been going on ever since the fall of 2009. every now and then people think it’s accelerating. sometimes i think it’sdecelerating. just kind of creeps along. brian, ever since thisdecision was made about 26 hours ago we’ve been trying to figure out what the fed saw or everyone else didn’t. or at least everyone we were talking to ahead of time. you’ve made an announcement recently you’d be laying off about 2,000 people because of the huge decline in demand for mortgages. i guess you’re seeing some of the what the fed has been seen in terms of mortgage business. do you think this move to continue with 85 billion a month will make a difference when it comes to what you’re seeing in terms of demand for mortgages. you saw it yesterday. i think i’d second what warren said. you have an economy which we see very constructive. growing 1.5%, 2%.we don’t see a lot of downside risk absent the usual things youcan make up. you don’t see a lot of downside risk. i think the fed just thinks, i think the chairman was clear about it yesterday, until unemployment is down he’s got to keep this economy going the right direction for fear it might go in the wrong direction. mortgages are another way, low mortgage rates helps house wk helps housing starts, helps warren’s carpet factories. what are you seeing in terms of the overall economy, brian? you’ve got, i think, one out of every two american households does business with bank of america. what are you seeing in terms of the economy? we still see consumersspending. the data that we see, spending for the month of september so far is about 5% to 6% over last year’s september. the internet spending grows at twice that rate. you might hear different retailers have different outcomes depending on whether they’re on the internet more or less. the overall spending levels are up about 5% to 6% from last year.we see it continue to move forward. corporate side, they’re veryconstructive. access to markets is there. it’s okay. the question is, it just takes time. i think people wish this were going faster.it’s just a lot of work to take a huge economy like ours and get it completely back to where people want it, 3% plus growth.warren, if qe-3 hasn’t been working to this point and the fed is now saying we have to wait until we see the unemployment level to come down before this happens, is it going to get us there faster? i don’t want to say it isn’t working — it’s hard to say what would have happened if they’d gone the other direction.the economy is improving. but i think probably bernanke was hoping to see an acceleration of the rate of improvement. and what he’s seeing, i think, is a continuation of more or less the same rate. maybe if they hadn’t been doing it, you’d have seen even less than 2%. who knows. i think my question was,though, if you look at them saying we need to see a big pickup in the economy, that’s not necessarily something that’s going to happen next month. no. who knows when it’s going to happen.no. you could be looking at this rate for quite a while. but i’m no good on that sort of thing. i really don’t try and predict it. brian, i know the next fed chairman is going to be your regulator. do you know janet yellen well? do you have any thoughts aboutwho you’d like to see as the next fed chairman? we know all the candidates. so that’s a question that anybody will answer, i think it’sp to other people to make that decision. we’ll work constructively with all the candidates i’ve heard mentioned. i’m sure there’s some i haven’t thought of. we work constructively with the fed and always will. warren, how about you? who do you think the next fed chairman should be? i think bernanke. i think if you’ve got a .400 hitter in the lineup you don’t take him out. he may want to leave. but i think — i think he’s done — since the panic of five years ago, i think he’s done a terrific job. i think he ought to get a chance to play out a little more. you think the president should ask him to stay for another term. that’s what i would — yeah. i don’t think that’s necessarily going to happen.that’s what i would do. if bernanke doesn’t want to do that, who do you think should step in? who would be wrour secondchoice? yeah. i don’t have a second choice. i don’t know. i don’t know janet yellen at all. i just don’t know enough about the various candidates to come up with a second choice. i know bernanke in my view is very, very good. i would not trade him away anymore. — anymore than i’d trade some of our great managers at berkshire away. what do you think of — whoever has that job, at some point is going to have to do something that’s pretty much unprecedented starting with a $3.5 trillion balance sheet, still growing. it’s easier to buy than to sell. they don’t have to sell. i mean, but playing out the last — the last half of this game is — is very different than the first half. brian would know a lot more about that than i would. but i think bernanke ought to be given a chance to play the whole game rather than just the buying end of it. brian, what do you think just about the exit strategy? we spoke with stan ckenmiller today. you said he worries the academics at the fed don’t necessarily know some of the problems that could come up with this exit strategy. i think they’ve studtied it. they’ve thought about it. they’re playing out the exit strategy as we speak. in other words, the dialogue and transparency and clarity. if you ask the people who work on a trading desk around wall street yesterday, a lot of them were set up the wrong way. nal happen. it’ll go through the system. 0 year bond’s restabilized at a different level. remember, it doesn’t go far back that it was 100 basis points lower. the first 100 basis points was a 60% move as opposed to 10% move. it has to be carefully crafted. not only in the united states but around the world. but i think people can get in the science of this. i think the clarity that has been through all the central banks, we’ll get out as the economy improves. that’s the piece people aremissing. they’re thinking they’re getting out without the economyimproving to the rate they want. given a strong economy growingat whatever rate they need to feel that unemployment is comingdown, this will be, i think, somewhat less of a pressingquestion. given the first thing. they’re not going to get out until there is a strong economy. you have sort of a chicken and egg. i don’t think it’s impossible that five years from now that you have a $3.5 trillion fed balance sheet. they may take it back to wherethey’re not going one direction or the other. but i don’t think it’simpossible that they just decide they’ll sit at $3.5 trillion like they used to sit at $1.5 trillion. stan druckenmiller also said today in terms of qe-3 as a citizen he’s concerned. but he said as a money manager he thinks this is great news. because he thinks equities will move higher. at least in the intermediateterm. what do you think about that, warren? well, the lower interest rates are — the more assets are worth, basically. to the extent that qe-3 is — is keeping interest rates lower than they would otherwise, it probably keeps asset prices higher than they might be otherwise. there’s other variables. if that doesn’t exist maybe it’s because business is a lot better. there’s more than one variable. there’s really dozens of variables. interest rates are a terribly important variable in the valuation of assets.when you look around at the market, though, it’s definitelymoved significantly over the last four or five years. sure. we’ve seen some major pickup. when you look around, are there still deals that you can see like the deal you did with brian with bank of america? do you still see good positions or have stocks just moved too far? they’ve moved a long way. they were very cheap five years ago. ridiculously cheap. that’s been corrected. they’re probably more or less fairly priced now. i don’t think — we don’t find bargains around. but we don’t think everything — things are way overvalued, either. we’re having a hard time finding things to buy. great. we’re going to continue this conversation. we will air it tomorrow morning on squawk box. in the meantime, maria, is there a quick question you have? i’d like to get their thoughts on regulation. it seems the profit story is very much in place. as profits have gone off for so many companies, so have theexpenses of regulation. jpmorgan paying $800 million. what’s on the horizon for bank of america in that regard? yeah. brian, maria asks just in terms of regulation, obviously you see what’s happened with jpmorgan today with the amount they’respending on this. with the expenses that have gone up along with this, can you just tell us what’s on the horizon with the regulatory front for bank of america? well, we’ve had a lot ofdiscussion about this the last few years with maria and othersand yourself. because we got through this — we got into some of these issues especially on the mortgage area earlier. we put a lot of this behind us. we continue to work through it. this is is a period a lot of regulations got passed to stop all the different things we weren’t doing right. if you look at it from a broadperspective, we doubled our capital. in the company and industry. we’ve quadrupled liquidity. we’ve simplified the company. that is where the right place to take it for the customers was and the shareholders. i think most of the people in the industry are doing that. i think the regulations arepushing us harder towards that outcome. gentlemen, haung very much. we’ll continue this conversation as we mentioned on tape. maria, right now back to you. the rest of this conversationtomorrow morning on squawk