"We don't find bargains around but we don't think things are way overvalued either. We're having a hard time finding things to buy."

Warren Buffett said stocks have "moved a long way" in the past five years, going from "ridiculously cheap" to "more of less fairly priced now."

In fact, he said the economy might be doing even worse if there was no Fed asset buying. "Maybe if they hadn't been doing it, you'd have seen ever less than 2 percent (growth). Who knows?"

Buffett said it appears the Federal Reserve's quantitative easing hasn't worked as well as chairman Ben Bernanke would like, but he doesn't think its been harmful either.

In a live interview alongside Bank of America CEO Brian Moynihan on CNBC's " Closing Bell ," Buffett also said the U.S. economy is continuing the "gradual increase" we've seen since the fall of 2009. "It just creeps along."

Even though he thinks it is unlikely Bernanke will be staying, Buffett said he has no second choice.

"He may want to leave, but I think he's done — since the panic of five years ago — I think he's done a terrific job. And I think he ought to get a little bit more of a chance to play out the hand."

Ask who should be the next Fed chairman, Buffett said he would have asked Bernanke to stay in the job. "When you have a .400 hitter in the lineup you don't take him out."

Buffett said we could be seeing the same slow rate of increase for "quite awhile" but noted that he doesn't spend a lot of time trying to predict what the economy will do.

We don't find bargains around but we don't think things are way overvalued either. We're having a hard time finding things to buy.

Moynihan said the economy has been very constructive with continued increases in consumer spending and he doesn't see much downside risk for it.

Buffett said he didn't have any "great expectations one way or the other" ahead of Wednesday's Fed announcement that it won't be reducing asset purchases yet, and "it doesn't really make any difference to me in terms of our business or investments whether it's (the taper ) zero of 10 billion or 20 billion. Some day it'll stop. Maybe it'll go the other direction."

Here's an unofficial transcript of the live interview:

BECKY QUICK: Maria, thank you very much. Gentlemen, thank you both for joining us today. Again, we're here with Brian Moynihan and Warren Buffett. I know you gentlemen are here because you're going to be speaking to about 700 people just after this at the Center for Global Social Enterprise here at Georgetown.

But we wanna thank you for joining us in advance. There has been an awful lot of news, an awful lot of surprise, about what happened with the Federal Reserve, and Warren I just wanna wonder— did— it took us by surprise. Did this catch you by surprise that the Fed decided not to taper?



WARREN BUFFETT: Well, only because I'd been reading everyplace that people expected something, but I— I— I don't have any— I didn't have any great expectations one way or the other. And it— it doesn't really make any difference to me in terms of our business or our investments whether it's zero or $10 billion or $20 billion. I mean, someday it'll stop and— (LAUGH) maybe it'll go the other direction.



BECKY: Although you had been telling us for a while that you didn't think QE3 was effective as some of the earlier programs had been—



BUFFETT: Well, I think that's right, which is probably why it's (LAUGH) being continued. It— it— it hasn't done the job yet that they hope that— presumably they hoped it would. So— but it— I don't think it's been harmful, and— and— what— what you see in the economy is just this gradual increase which has been going on ever since the fall of 2009. And— and every now and then people think it's accelerating, sometimes they think it's decelerating. (LAUGH) Just base— (SLURS) it just kinda creeps along.

BECKY: You know, Brian, ever since this decision was made just about 26 hours ago, we've been trying to figure out the Fed saw that everyone else didn't-- or at least everybody that we were talking to ahead of time. You've made-- an announcement recently that you'd be laying off about 2,000 people because of the huge decline in demand for mortgages.



I guess you're seeing some of what the Fed has seen in terms of mortgage business. Do you think that this move to continue with $85 billion a month will make a difference when it comes to what you're seeing in terms of demand for mortgages?



BRIAN MOYNIHAN: Well, you saw it yesterday in-- in (UNINTEL) mortgages tightened-- fairly dramatically. So, you know, I think-- I think-- I second what Warren said. You have an economy which we see very constructive growing at, you know, 1.5% or 2%.



We don't see a lot of downside risk-- (UNINTEL) the usual things you can make up. But you don't see a lot of downside risks, and then I think the Fed just thinks it-- it-- and I think the chairman was clear about it yesterday. Until unemployment's down, he's gotta keep this economy goin' the right directions for fear that it might go in the wrong direction. And mortgages are one way that-- low mortgage rates help housing, helps housing starts, helps-- Warren's carpet factories, helps all the (UNINTEL).



BECKY: What-- what are you seeing just in terms of the overall economy? Brian, you've got the-- I think one out of every two American households-- the business of Bank of America. What-- what are you seeing in terms of the economy?



MOYNIHAN: We still see consumers spending. I mean, in the data that we see, the spending for the month of September so far is about 5% to 6% over last year's September. The Internet spend growth at twice that rate, so you-- you might hear different retailers have different outcomes depending on whether they're on the Internet more or less.



But the overall spending levels are up about 5% to 6% from last year. And so we can see-- ka-- see-- continue to move forward, and then when you talk about corporate side, they're very constructive. Access to markets is there, and so it's-- it's okay. And-- and the question is it just takes time. And I think people wish this were-- were going faster, but it's just a lot of work to take a huge economy like ours and get it completely back to where people want it-- 3%-plus growth.



BECKY: Right. Warren-- if QE3 hasn't been working to this point, and the Fed is now saying that we have to wait until we see the unemployment level come down before this happens, is it going to get us there faster?



BUFFETT: Well, I (UNINTEL) being said it isn't working thus far. I mean, because it's hard to say what woulda happened if they'd gone the other direction, but it-- the economy's improving. But I think that probably Bernanke was hope-- hoping to see an acceleration of the rate of improvement, and what he's seen, I think, is a continuation of more or less the same rate. But maybe if they hadn't been doing it, you know, it-- you'd have-- you'd have seen-- even less than 2%. Who knows? (LAUGH)



BECKY: I think my question was, though, it-- if-- if you look at them saying, "We need to see a big pick up in the economy," that's not necessarily something that's going to happen next month or (UNINTEL) after it--



BUFFETT: No. No, no. Who knows what is gonna happen. It-- no, you could be looking at this rate for quite a while. But I don't-- I'm-- I'm not good on that sorta thing, and I-- and I-- it-- I really don't try and predict it.



BECKY: Brian, I know the next Fed chairman is going to be your regulator. Do you know Janet well-- Yellen well? And do you have any thoughts about who you'd like to see as the next Fed chairman?



MOYNIHAN: I can-- we know all the candidates and not-- sure that that's a question that (LAUGHTER) anybody will answer. I think it's up to other people to make that decision, and we'll-- you know, we'll work constructively with all the candidates that I've heard mentioned. And I'm sure there's some I haven't thought of, but-- they-- we work constructively with the Fed and always will.



BECKY: Warren, how about you? Who do you think the next Fed chairman--



BUFFETT: My--

BECKY: --should be?

BUFFETT: Well, I know who-- well, I-- I think Bernanke-- I think if you've got a 400 hitter in the lineup, you don't take him out. And-- you know, he may-- he may wanna leave, but I think-- I think he's done-- since-- since the panic of-- five years ago-- I think he's done a terrific job. And-- I think he oughta get a chance to play out a little more of a hand.

BECKY: Meaning you think the president should ask him to stay for another term?



BUFFETT: That's what I would-- yeah, I don't think that's necessarily gonna happen, (LAUGH) but I-- but that's-- that's what I would do.



BECKY: If Bernanke doesn't want to do that, who do you think should step in? And who would be your second choice?



BUFFETT: Yeah, well I-- I'd-- I don't have a second choice. But-- I-- I don't-- I don't know-- I don't know Janet Yellen at all. And-- and-- I just don't know enough about the various candidates to come up with a second choice. I know Bernanke, in my view, is very, very good. So-- and-- I would-- I would not trade him away anymore. I'd trade some of our great managers at (LAUGH) Berkshire away.



BECKY: What-- what do you worry about in terms of what the Fed is facing and how difficult the exit strategy might be?



BUFFETT: Well, there-- whoever has that job at some point is going to have to do something that's pretty much unprecedented, starting with a $3.5 trillion balance sheet still growing. And-- it's easier to buy than to sell. Now they don't have to sell.



I mean, the-- the-- the-- the-- but-- (COUGH) playing out the last-- the-- the last half of this game is-- is very different than the-- the first half. Brian would know a lot more about that than I would, but I-- (CLEARS THROAT) I-- I think Bernanke oughta be given a chance to-- to play the whole game rather than just the buying end of it. (CLEARS THROAT)



BECKY: Brian, what do you think just about the exit strategy? We-- we spoke with Stan Druckenmiller today, and he said that he worries the academics at the Fed don't necessarily know some of the problems that could come up with this exit strategy?



MOYNIHAN: Well, I-- I think-- they've studied it, they've thought about it. They're playing out the exit strategy as we speak, right? In other words, the dialogue and the transparency and the clarity-- so, you know, if you speak the people who work on a trading desk around Wall Street yesterday, a lot of 'em were set up the wrong way.

It-- that'll happen. It'll go through the system, the-- the tenure bonds re-stabilized and-- at a different level. But remember, it doesn't go far back that it was 100 basis points lower. So the first 100 basis points was-- what-- a 60% move, as opposed to 10% move. And, you know, so, hey, it-- it has to be care-- carefully crafted not only in the United States, but around the world.



But I think people can get into the science of this, and I think the clarity that has been through a central banks is we'll out as the economy improves. And that's the piece people are missing. They're thinking they're getting out without the economy improving to the rate they want.



Given a strong economy, go on-- whatever rate that they need to feel that the unemployment's comin' down, this'll be-- I think some-- more-- less of-- a pressing question, given the first thing. And-- and they're not gonna get out until there is a strong economy, so, you have sort of a chicken and egg thing.



BUFFETT: And I think think it's impossible that five years from now that you'll have a $3.5 trillion Fed balance sheet. I mean, they may-- they may take it back to whether or not going one direction or the other, but I-- I don't think it's impossible that they-- they just decide they'll sit at $3.5 trillion like they used to sit at $1.5 trillion.



BECKY: You know, we-- Stan Drunkenmiller also said today that-- in terms of QE3, as a citizen, he's concerned, but he said as a money manager, he thinks this is great news because he thinks equities will move higher, at least in the intermediate term. What do you think about that, Warren--



MOYNIHAN: Well--



BUFFETT: The lower interest rates are the-- the more assets are worth, basically. And-- and to the extent that-- that QE3 is-- is-- is keeping interest rates-- rates lower than they would otherwise, it probably keeps asset prices somewhat higher than they might be otherwise.



But there's other variables. I mean, if-- if that doesn't exist, it's maybe because business is a lot better. So the-- there's more than one variable. There's-- there's-- there's really dozens of variables, but interest rates are a terribly important variable in evaluation of assets. (CLEARS THROAT)



BECKY: When you look around at the market, though, it's definitely moved significantly over the last four or five years?



BUFFETT: Sure--



BECKY: We've seen some major-- pick up. When you look around, are there still deals that you can see, like the deal that you did with Brian-- with Bank of America? Do you still see good positions? Or have stocks just moved too far?



BUFFETT: They've-- they've moved a long way. They were very cheap five years ago, and-- ridiculously cheap. And-- that's been corrected. They're probably more or less fairly priced now. I mean, I don't think-- we-- we don't find bargains around-- but we don't think everything-- things are way over valued, either. We're having a hard time finding things to buy.

BECKY: OK, great. We're gonna continue this conversation, and we will-- air it tomorrow morning on "Squawk Box," but Maria, in the meantime, is there a quick question that you have for either Brian or Warren?



MARIA BARTIROMO: Well, I guess I would just say, Becky, I'd like to get their thoughts on regulation. It seems like the profit story is very much in place, but as the profits have gone up for so many companies so have the expenses for regulations. JPMorgan paying $800 million. What's on the horizon for Bank of America in that regard?



BECKY: Brian, Maria asks just in terms of regulation-- obviously, you see what's happened with JPMorgan today with the amount that they're spending on this. With the expenses that have gonna up along with this, can you just tell us what's on the horizon with the regulatory front for-- Bank of America?



MOYNIHAN: Well, we-- we've had-- a lot of-- discussion about this the last few years with Maria and others and yourself-- because we got through this-- but we got-- this-- some (SLURS) issues, especially on the mortgage area earlier. We put a lot of it behind us.



We continue to work through it. But I think, you know, this-- this is a period in which a lot of regulations got pass the stuff-- all the different things that we weren't doing right. But if you look at it from the broad perspective, we doubled our capital in our company and in the industry.



We've quadrupled the liquidity. We've reduced the size of the commo-- of the Merrill Lynch-Bank America combination by a third, and we simplified the company. And I think that-- that is where the right place to take it for the customers was and the shareholders, I think most of the people in the industry are doing that. And I think the regulations are pushing harder towards that outcome.



BECKY: All right, gentlemen, thank you very much. We're gonna continue this conversation, as we mentioned, on tape. Maria, right now I'll send it back to you, and-- we'll have the rest of this conversation tomorrow morning on "Squawk Box."