Buffett Suggests Economy Will Rise Like 'a Terrific Athlete'

The economy may have suffered a huge jolt, but "when [the patient] gets going again, he'll be setting tremendous records. That patient is a terrific athlete," famed investor Warren Buffett told ABC News today.

All recessions are a jolt to the economic system, but "this one was a real shake. It really shook up the confidence of the American public," the Berkshire Hathaway CEO told ABC News. "We know that it will be over, but we can't predict the timing."

Credit Rating Downgrade 'Irritates Me'

Buffett gave his first one-on-one interview to ABC News after telling a record crowd of 35,000 at the annual Berkshire Hathaway shareholders meeting that he took the company's recent ratings downgrade as a personal blow.

VIDEO: Warren Buffett talks to Bianna Golodryga about the economy.Play

Berkshire has taken a hit this year and last, the worst year under Buffett's leadership. The company was recently downgraded from its AAA credit rating to AA, according to Moody's Investors Service. S&P, another ratings service, did not downgrade Berkshire.

"The AAA is not going to be material to Berkshire," he said, "but it still irritates me."

"As far as I'm concerned, Berkshire is still a AAA-rated company," he said.

Buffett says Berkshire Hathaway will report a roughly 10 percent drop in its first-quarter operating profit next week.

Berkshire will not release its first quarter earnings report until Friday, but Buffett said it will report an operating profit of about $1.7 billion.

A year ago, Berkshire reported $1.9 billion in operating profit for the first quarter. Berkshire finished this quarter with $22.7 billion cash, Reuters reported.

During the meeting, Buffett expressed the support for the government's actions to help the economy recover.

"Overall, I commend the actions taken," he said. "It's hard to expect perfection from people who work 20-hour days and are punched from all sides. Overall they did a very very good job."

Buffett and vice chairman Charlie Munger answered questions from both the audience and, for the first time, e-mails in today's daylong annual shareholder meeting.

"It's unreasonable to expect perfect ideas during crisis situation like this," he said. "Of course there's going to be some government reactions that are foolish; some accounting rules and standards are insane. The government in September of last year really faced a situation as close to full meltdown as you can imagine. The credit market was frozen, money markets were declining. We were really looking into the abyss."

But Buffett remains sympathetic to the "good banks," singling out Wells Fargo and JPMorgan Chase. Berkshire owns a stake in Wells Fargo.

He was asked about the banking sector, specifically for his reaction to news that Wells Fargo chairman Richard Kovacevich indicated he didn't want TARP funds and thought the government's intrusive actions were counterproductive.

"I'm sympathetic to Wells CEO Kovacevich who was told to take TARP money and only had an hour to decide what to do. But that's the nature of an emergency," he said. "All banks aren't alike by a long shot."

Buffett told ABC News in an exclusive interview that the 19 banks that have received the most money from TARP "are doing really well under the circumstances. ... No one needs to worry about the money that's in those banks."

With regards to other banks -- and knowing what warning signs to look for -- Buffett pointed to WaMu, the bankrupt holding company of what was Washington Mutual Bank and once the largest U.S. savings and loan company. U.S. regulators seized the bank Sept. 25, 2008, and its deposits were sold to JPMorgan.

"There were a lot of signs that they were doing things that a highly leveraged institution shouldn't be doing. Some of those big institutions did some stupid things. I would say most of them," he said.

Buffett noted, again, that "Wells has the best competitive position out of the largest banks in the country."

As far as investors doing their homework and looking for the "warning signs," he said, "the information is there. It was pretty clear what was going to happen with Fannie and Freddie. The government was telling them for months to go out and raise more capital. You take one look at them, and you could see they were in trouble."

Buffett Questioned About His Successor

As for who would replace him as CEO, Buffett -- who is 78 -- said, "If I were to drop dead tonight, someone is in place to take over."

He said there are already candidates lined up as possible successors.

Buffett addressed other sectors of the economy during the meeting.

On residential real estate and where it's headed, Buffett is optimistic that there is evidence of more stability and improvement.

"We don't know what real estate will do; it's hard to tell. But I will tell you this, from what I'm seeing, in the last few months, we've seen a real pick-up in activity [in medium- to lower-priced homes]. We haven't seen a bounce back in price. But it looks as if -- based on our real estate brokerage data -- we see something close to stability at these much reduced prices."

He added, "We create 1.3 million households a year. Fewer in a recession. But if you create 2 million starts annually, you're gonna be in trouble, and that's what we did -- created over capacity. So we have to absorb excess supply. We are eating up excess inventory now."

According to Buffett, there are three choices:

"One, blow up 1.3 million homes; two, start creating more children and force them to marry sooner; three, or just slow building and wait for demand to balance out with supply."

The Berkshire executives were also asked about the future of U.S. healthcare and the Obama administration's current ambitions to make reforms.

"I believe that eventually something like Europe['s healthcare] will come to course, and although I'm a Republican, I'm not horrified by that," Munger said. "But personally I wish they would put it off for a year and work on current economic crises."

When asked what long-term effects the economic crisis will have on the nation, Buffett focused on a more subdued and conservative consumer.

"By change in consumer behavior, I think the experience of the last few years will last for a while," he said. "For years, the government has been pushing Americans to save more. Ironic, now that they are, the government doesn't like it."

Buffett went on to say that shopping and retail will look significantly different. "Retailers will be struggling the most, the shopping center business will continue to [take] a very tough hit. I wouldn't look for any quick relief for retail services."