Buffett: US 'recession' will go on for months

Billionaire investor Warren Buffett said the US economy was still "in recession" and would continue to be for at least several more months.

During a live appearance on CNBC, Mr Buffett said ripples of the credit crunch were continuing to cause problems in financial businesses and the economy.

Earlier this year he said a financial crisis revealed which players had been "swimming naked" because the tide goes out. That picture had worsened along with the crisis.

"We found out that Wall Street has been kind of a nudist beach," said Mr Buffett, chairman and chief executive of Berkshire Hathaway, based in Omaha, Nebraska.

Mr Buffett said he was confident the US would be doing better five years from now, but the economy could be worse five months from now.

Mr Buffett said by his reckoning the economy was in a recession because most Americans were not doing as well today as before.

The technical definition of a recession most economists use is two consecutive quarters of negative growth in the nation's gross domestic product.

On the nation's credit crunch, Mr Buffett said he believed mortgage giants Fannie Mae and Freddie Mac were too big to fail, but that did not mean that all the shareholder equity in those companies could not be wiped out.

"They're looking for help, obviously. And the scale of help is such that I don't think it can come from the private sector," Mr Buffett said.

Together the companies hold about half of US mortgage debt and are the largest source of funding for home mortgages. But they are seeing too many defaults. Losses between April and June for the two companies totalled US$3.1bn (€2.1bn) and investors fear they will continue to grow.

Mr Buffett said it is likely more banks would fail, especially in areas where there was a property bubble and the bank got heavily involved in the housing market.

"What we'll see is failures where the bankers were dumb in what they did," Mr Buffett said.