Warren Buffett said the U.S. economy is unlikely to improve before 2009, and there was a "reasonable chance" that Fannie Mae and Freddie Mac shareholders would be wiped out though the companies themselves are too big to fail.
Speaking on Friday on CNBC television, Buffett, the billionaire investor, said some businesses in his Berkshire Hathaway Inc insurance and investment conglomerate are struggling as the economy suffers from past excess in making credit available.
"You always find out who's been swimming naked when the tide goes out. We found out that Wall Street has been kind of a nudist beach," said Buffett, who was called the world's richest person by Forbes magazine.
Referring to credit deterioration, Buffett said, "Right now the situation is still getting worse, and I would say that I don't see any early end to that."
He also said Federal Reserve Chairman Ben Bernanke "does not have any magic wand" to bolster an economy facing weak growth and mounting inflation. "In my judgment it won't be any better five months from now," he said.
Buffett said he is supporting Barack Obama, the presumptive Democratic nominee, in November's U.S. presidential election, but admires Republican rival John McCain.
"President Obama is going to have plenty on his plate in January," Buffett said.
STOCKS ATTRACTIVE
Buffett said U.S. stocks are broadly "more attractive" than they were a year ago, adding that Berkshire has no currency bets against the U.S. dollar.
The Omaha, Nebraska-based company bought $3.98 billion of stock in other companies in the second quarter.
Buffett spoke on CNBC in connection with the national roll-out of the documentary "I.O.U.S.A.," which argues that the nation might face an economic disaster if it doesn't come to grips with its mounting debt levels.
Buffett is interviewed in the movie.
Since 1965, Buffett has transformed Berkshire from a failing textile company into a $180 billion conglomerate with about 76 businesses that sell a range of products from bricks, carpeting, manufactured housing and paint to ice cream and underwear.
FANNIE, FREDDIE "TOO BIG TO FAIL"
"What we're seeing in business, in our retail businesses, or anything having to do with housing, is even a further slowing down in June and July, both in terms of credit experience where people first got in trouble with house payments, and now credit card payments," Buffett said.
Berkshire also invests in blue-chip companies like American Express Co and Wells Fargo & Co. Buffett said he has invested more in one of these companies in recent months, but did not say which one.
Fannie and Freddie shares have plummeted as speculation grows about a government bailout of the companies, which own or guarantee almost one-half of U.S. mortgages. Shares of both have fallen more than 90 percent in the last year.
"They're too big to fail," Buffett said. "That doesn't mean that the equity can't get wiped out, and it almost has. In a practical sense, as institutions, they don't have any net worth."
Buffett forecast that "you'll see some action fairly soon" to support the companies, but that he has not been approached to assist in any bailout. He said "nothing is going to happen" to investors in the companies' insured mortgages or debt, but "the equity and preferred stock is another question."
Buffett also said he made a mistake selling 61 percent of Berkshire's stake in Anheuser-Busch Cos for about $61 to $62 per share, ahead of the U.S. brewer's July agreement to be taken over by Belgium's InBev NV for $70 per share.
"It was about valuation and whether I thought the deal would go through," Buffett said. "In retrospect, I was wrong to decide to partially sell."
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