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) -- Warren Buffett and Charlie Munger of

Berkshire Hathaway

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agreed at their Saturday shareholder meeting more needs to be done about the risky and swollen derivatives market in the United States.

In a sprawling question-and-answer session with shareholders, analysts, journalists and Doug Kass, a current short-seller in Berkshire shares, Buffett and Munger noted the risks derivatives pose for the U.S. financial system.

The two

Berkshire Hathaway

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heads, however, disagreed on the health of the financial sector in the U.S. in the wake of the financial crisis.

"I consider the banking system in the United States to be stronger than at any time in the last 25 years," Buffett said at the shareholder meeting.

Also see:

Doug Kass Questions the Berkshire Boys

The so-called "Oracle of Omaha" also reaffirmed support of Berkshire's top bank stock holdings such as

Wells Fargo

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U.S. Bancorp

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M&T Bancorp

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"I do not worry about the banking system being the cause of the next bubble." Buffett said in response to a shareholder question asking whether Berkshire Hathaway, with its insurance and financial operations, is 'too big to fail."

Also see:

Buffett's Next 5 Years and Berkshire Hathaway for the Ages

Munger, Buffett's top lieutenant and vice chairman at Berkshire Hathaway, took a less sanguine tone in the shareholder meeting.

"I am a little less optimistic about the banking system long term," Munger said, countering Buffett's general assessment of the soundness of U.S. banks.

Munger's concerns appeared to center on the trading operations at the nation's largest banking conglomerates and appeared to raise support for financial sector firewalls such as the Volcker Rule, a piece of the 2010

Dodd Frank Act


"We have a grossly swollen securities and derivatives market" Munger said, to audience applause.

Also see:

Warren Buffett Walks Exhibit Hall

"I would like to see something extreme," Munger said of regulations that allow banks to mix speculative derivatives books with insured deposits.

On that Buffett agreed, even if he gave the U.S. banking sector a generally clean bill of health.

"I am with Charlie on that," Buffett said.

Buffett has previously called credit derivatives 'weapons of mass financial destruction.'

In a twist to Berkshire's annual meeting, Buffett and Munger fielded questions from Seabreeze Partners President and

Real Money Pro

contributor, Douglas Kass.

Some questions centered on the profits Berkshire took from providing emergency capital to banks in need during the financial crisis.

Kass pointed out that distressed investments in

Goldman Sachs

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Bank of America

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General Electric

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veered from Berkshire's historical focus on the investing in companies with solid fundamental growth opportunities.

The Seabreeze president questioned whether a successor to Buffett would be able to make similar investments in an economic emergency.

In response, Buffett said his successor would have more capital than he had so will absolutely have the ability to take on any distressed opportunities that arise.

"Berkshire will have unusual capital in turbulent times. My successor can say yes very quickly

to distressed deals that require large sums of capital. That will set you apart very quickly from others." Buffett was very confident that his successor would be willing to deploy that capital when the need for capital arises, but only in sound deals.

Buffett explained, "Berkshire is the 800 number to call when people need capital in distressed times." It's more a sign of Berkshire's brand than anything attached to a single individual, he said.

-- Written by Antoine Gara and Lindsey Bell.

Follow @antoinegara