Billionaire hedge fund investor Stanley Druckenmiller said Friday that mounting corporate debt puts the U.S. in bad shape in the event of a recession.

Druckenmiller believes the Fed should have raised rates more in 2016 when it had the chance. By not raising borrowing costs, it caused corporate debt to balloon to $10 trillion and left the Fed with less firepower to fight an economic contraction.

"We are in worse shape for a recession now than if things had slowed down," Druckenmiller told CNBC's "Squawk Box."

"The biggest problem is what [then-Fed Chair Janet] Yellen did. We had a booming economy, fairly early cycle. I know I talk to much about the Fed, but at the time I said they should sneak one in every time they can until they get to some normal rate," Druckenmiller said. "We had that whole period in 2016 where, in my opinion, they could have gotten to 3.5 or 4, we'll never know but they could have at least tried."