On November 3, 2009, Warren Buffett, Chairman of the Board of Berkshire Hathaway, participated in a telephone interview on Fox Business. A transcription of the interview follows:

LIZ CLAMAN: Let’s get to the story of the day. Berkshire Hathaway making this huge bet on the railroads, one in particular, acquiring Burlington Northern Santa Fe, in a deal worth about $44 billion. Let’s talk to talk to the man behind the deal. It was all his idea. On the phone, Warren Buffett, Chairman and CEO of Berkshire Hathaway. Hello, Warren, how are you?

WARREN BUFFETT: Hi, Liz.

CLAMAN: What, what’d you do? Just wake up some day and say “I think I’ll spend another $26 billion in cash and stock for a railroad”? How did this come about?

BUFFETT: It came about because our board had a meeting that had been scheduled for a year down in Fort Worth, the reason being that we have three different businesses that we own in Fort Worth and Debbie Bosanek, my assistant, said let’s do the next one in Fort Worth and check out those companies. So we went down there a week ago last Thursday, and I went down a couple of hours earlier- early because there were two people I wanted to see. One was my friend John Roach and the other one was Matt Rose over at BNSF. And while I was over there, we had about ten minutes alone after some vice presidents made a presentation, and I said, “Matt you know if you’re ever looking for a home for the railroad, Berkshire would make a good one.” And he didn’t throw me out of the office, so the next day I made him an offer, and he said he would take it to the directors. And the rest is history.

CLAMAN: Okay, so it’s a ten-minute meeting and then a week. That’s awfully fast, but this is how you operate. You know you had already owned of course about 24 percent of Burlington Northern. What was it that crystallized your belief in that 10 minutes or the vice presidents’ presentation that you ought to buy the whole thing?

BUFFETT: Well it wasn’t- it wasn’t- you know I felt good about it from the time we bought our first stock in 2006, but if, you know, if I hadn’t- if we hadn’t scheduled the meeting down there, it probably wouldn’t have happened, at least it wouldn’t have happened now. But I, you know, I like the business very much. I think the management is the best there is. And like I say, when I didn’t get thrown out of the office, I made it specific. And it was a good offer from their standpoint, and they decided to accept it. And now we’re going to own a railroad. And we never fool around on things, Liz. I mean I tell the lawyers, “Get this thing done,” you know.

CLAMAN: Well, I think Debbie Bosanek, your assistant, who thought it best to make the meeting down there should get the big high five. Not bad at all.

BUFFETT: Well, yeah, you’ll see we didn’t have an investment banker on the deal, but maybe we should’ve put her down.

CLAMAN: She’s smart enough to do it. What is it ,Warren, that you see in the railroad transport area versus the trucking or air cargo?

BUFFETT: Well, the rails move the freight at a much more environmentally friendly way than the truckers do, and they also only use about a third of the fuel. So it’s helping- it helps our trade balance in the long run. You know, it helps in terms of the atmosphere. It is a very, very efficient, effective, environmentally friendly way of moving freight. And, you know, our railway is a huge asset to the country.

CLAMAN: BNI of course hauls about 10 percent of the nation’s electricity-generating coal. Is this, Warren, a bet somehow on coal?

BUFFETT: Well, they haul a lot of coal, and coal from the Powder River Basin in the West is more competitive - it’s lower sulfur coal than in the East. So, it will be around for a long time. But coal, over the long run, coal will diminish in relative importance.

CLAMAN: There’s a growing anti-rail lobby in Washington right now. I know you know because you do your homework on this stuff, with a push by the shippers to re-regulate. The railroad anti-trust enforcement act, if you will. Do you have any friends in Washington who assured you that railroads would not be re-regulated, because I would imagine that if the Obama administration went along with the shippers to re-regulate the rails, that might hurt your investment?

BUFFETT: Well, I would say since the Staggers Act back in 1980, which diminished the regulations substantially, you’ve had enormous progress with the rail system. You’ve decreased prices on inflation-adjusted terms significantly. So I would say that the deregulation that took place starting in 1980 has actually benefitted the shippers enormously. And we’re moving far, far more freight, you know, with using far less fuel very efficiently. My guess is that people will see the rails for what they are, as really, as an outstanding way to be moving freight around the country.

CLAMAN: Cheapest, best way, but then there’s cap and trade, Warren. Some analysts are very skittish about coal and a possible backlash if cap and trade goes through. And you’ve mentioned now, you said we’re going to see a diminishing of coal use, but what do you think cap and trade would do to the business if that actually went through?

BUFFETT: Well, it won’t change the composition of what utilities are doing tomorrow or next week or next year. Utilities over time are going to use less coal and probably more nuclear. And our own utility, for example, uses wind very substantially in Iowa. So over time, coal is going to diminish somewhat. Now, I think that will hit Eastern coal more than Western coal, but that’s a fact of life over a considerable period of time. And that’s true whether there’s cap and trade, or not.

CLAMAN: The way you structured this deal, you’re using some Berkshire stock for this and then $16 billion, I believe, in cash to pull it off. The Berkshire board approved a what? — 50-to-1 split for the Class B shares. Why not all cash, Warren? Are you trying to preserve your cash at this point?

BUFFETT: I like to have a very comfortable level of cash. This is also the minimum amount of stock we can give and still have people be able to elect a tax-free deal that own BNSF stock currently. If we were going to use — I don’t like using stock, I can tell you that. I don’t like issuing Berkshire shares.

CLAMAN: Is this the first time you’ve used stock?

BUFFETT: No. No, we’ve used it before. In fact, if you go back to (INAUDIBLE) deal, that was an all-stock deal. But generally speaking, I’m not enthused about using stock. But using 40 percent and considering the fact we already own some, which we also bought for cash, we’re mostly using cash in this transaction.

CLAMAN: You just mentioned the tax-free aspect. Can you clarify a little bit on that?

BUFFETT: Well, 40 percent of the deal will be stock, and everybody will be able to opt whether they want stock or cash. And if less than 40 percent opt for stock, they get an all-stock allocation. And if more than 40 percent, still, people who opt for stock will get mostly a stock allocation. And to the extent they get stock, it will be a tax-free exchange.

CLAMAN: To acquire a company of this size when transportation demand is down, of course, as you said, is really a bet on the U.S. economy. In fact, in the release you called it an all-out wager on the economic future of the United States. When do you see the total recovery taking hold?

BUFFETT: I don’t know. But it doesn’t really make any difference in terms of this acquisition. If we’re going to hold something for a hundred years, the next week or month or year doesn’t really make any difference. If we hold it a hundred years, I guarantee you there will be some recessionary years in that period. And it really doesn’t make any difference whether it’s the first year or the fifth year or the eighteenth year. We’re in for keeps.

CLAMAN: It’s funny you did this with the rails because just two weeks ago we had Bob Oldstein of the Oldstein Funds on saying the rails are overstating their earnings and underdepreciating their equipment. Do you see it that way? Did you look into that?

BUFFETT: It’s true. I didn’t have to listen to that, but it’s true any company that has long-life assets is replacing assets that they bought many years ago with things that cost more money now. That’s true of our utility business, that’s true of any business. It’s true — if you build a plant that 30 years ago had a 30-year life. When you go to replace that same plant, it’s going to cost you more money. That’s a fact of life in an inflationary economy.