History will judge the Troubled Asset Relief Program more positively than people do now, said Warren Buffett, chairman and CEO Berkshire Hathaway, and in the midst of the first government shutdown in 17 years.
Appearing alongside former Treasury Secretary Hank Paulson on CNBC's " Squawk Box ," Buffett first addressed TARP-saying people don't realize how tough a position Paulson was in when he crafted the rescue package.
(Read more: Hank Paulson: Teaparty 'hijacked the debate' )
The chairman and CEO of Berkshire Hathaway said the bailout was vital at the time in order to shore up the credibility of the banking system. "Belief creates its own reality," Buffett said. "If people think the banking system is unsound, it is unsound, because no bank can pay out all of its liabilities at the same time."
The interviews were conducted a day after chief executives from major financial institutions met with President Barack Obama , and warned of adverse consequences if government agencies remain closed, and if lawmakers failed to raise the U.S. debt ceiling by mid-October.
(Read more: Wall Street CEOs sound alarms on fiscal problems )
Later in the day, the president spoke to CNBC-saying he's genuinely worried about what is going on in Washington and exasperated that Republicans are trying use to the shutdown and the borrowing limit fight as leverage to delay Obamacare.
(Read more: Obama to Wall Street: This time be worried )
"If [Republicans] can't get their way on another issue, they'll use the threat of, in effect, defaulting on the government's credit to get their way," Buffett said. "That won't work long-term."
"The public will turn on them, and they'll all of a sudden have a counter revelation," he predicted-adding that Washington "will go right up to the point of extreme idiocy" but won't cross it.
Buffett did provide a glimmer of hope if the Oct. 17 debt limit deadline is breached. "If it goes one second beyond the debt limit, that will not do us in. If it goes a year beyond that would be unbelievable."
"These guys may threaten to take their mother hostage, but they will never hurt their mother," joked Paulson, who's also a former chairman and CEO of Goldman Sachs.
Buffett played a crucial role in providing capital during the depths of the 2008 financial crisis, and rescuing Paulson's old firm. Berkshire's $5 billion lifeline to Goldman Sachs at the time has proved quite lucrative today. Berkshire has now exercised warrants acquired as part of the original deal-netting more than $2 billion in Goldman stock.
In addition to the warrants, that Berkshire-infusion had called for the investment bank to provide Berkshire with $5 billion in preferred stock, which paid annual dividends of $500 million. Three years later, Goldman repurchased those preferred shares from Buffett at a premium.
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image: © MarkGregory007