History will judge the Troubled Asset Relief Program more positively than people do now, Warren Buffett said on CNBC Thursday—five years to the day since the financial bailout program was signed into law, 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 to 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."