During a live appearance on CNBC, Buffett said ripples of the credit crunch are continuing to cause problems in financial businesses and the economy.
Earlier this year he said a financial crisis reveals which players have been "swimming naked," because the tide goes out. That picture has worsened along with the crisis.
"We found out that Wall Street has been king of a nudist beach," said Buffett, who is chairman and chief executive of Berkshire Hathaway Inc (BRK.A)., which is based in Omaha.
Buffett said activity at businesses Berkshire owns, especially ones related to housing construction such as Shaw carpet and Acme Brick, continued to slow during the summer.
He's confident the nation will be doing better five years from now, Buffett said, but the economy could be worse five months from now.
Buffett said the economy is in a recession because most Americans aren't doing as well today as they used to be. The technical definition of a recession most economists use is two consecutive quarters of negative growth in the nation's gross domestic product.
Regarding the nation's credit crunch, Buffett said he believes mortgage giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) are too big to fail, but that doesn't mean that all the shareholder equity in those companies can't 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," Buffett said.
So the Oracle of Omaha predicted that the federal government eventually will have to step in to help because the troubles of Fannie Mae and Freddie Mac seem to be growing and feeding on themselves.
Together the companies hold about half of U.S. 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 totaled $3.1 billion, and investors fear they will continue to grow.
Buffett and another billionaire investor, Pete Peterson, appeared at a special screening of a new documentary on the nation's debts Thursday in Omaha. The two Nebraska natives were part of a panel discussion after the premiere of "I.O.U.S.A." The film was shown in 358 theaters nationwide.
The film's message is that an economic disaster will befall the nation if the federal government's $53 trillion in debt continues to grow.
Buffett said he doesn't think the situation is as dire as the film portrays.
"I admire the fact they tackled the subject," Buffett said. "I don't agree with many of the conclusions in the movie."
Berkshire subsidiaries include insurance, clothing, furniture, candy companies, restaurants, natural gas and corporate jet firms. Berkshire also has major investments in such companies as Coca-Cola Co. (KO, Fortune 500) and Wells Fargo & Co. (WFC, Fortune 500)
Buffett said Friday he sold nearly two-thirds of Berkshire's 35.6 million shares of Anheuser-Busch Cos (BUD, Fortune 500). stock because he hadn't been sure Belgian brewer InBev SA's takeover bid of $65 a share would succeed.
"In retrospect, I was wrong to partially sell the holdings," Buffett said.
Anheuser agreed in July to a $52 billion takeover bid from InBev.
Berkshire sold Anheuser stock for about $61 or $62 a share, he said. But at the end of June Berkshire still held 13.8 million shares of Anheuser.
