The U.S. economy has not begun to climb out of the worst recession since the Great Depression, but the terror that followed last year's near- collapse of the financial system is gone, due in part to government intervention, Warren Buffett said on Tuesday.

Buffett maintained a positive outlook on the government's much criticized Troubled Asset Relief Program (TARP) for banks, saying it may ultimately turn a profit for the government.

At the moment we don't see it getting better or worse, but that's better than you could say six months ago, said the billionaire known as The Sage of Omaha for his long history of successful investments. The terror of last year is gone and that's thanks in part to the government.

President Barack Obama said on Tuesday that measures undertaken by his administration to rescue the economy -- including a $787 billion stimulus package -- were working, but warned a complete recovery would take some time.

Federal Reserve Chairman Ben Bernanke also gave a fairly upbeat view, saying the longest and deepest recession since the 1930s was likely over, but added it would feel like a very weak economy for some time.

Data released on Tuesday showed U.S. retail sales rose in August at the fastest pace in 3-1/2 years and a gauge of New York State manufacturing hit a near two-year high.

Economists are generally in agreement that the U.S. economy is in the early phase of recovery from the worst recession in seven decades. But many remain worried about lackluster consumer demand, with rising unemployment decimating incomes.

Buffett told Reuters in a brief interview at a Fortune conference in Carlsbad, California that the economy has not turned up but it will turn up ... I just don't know when.

It could be tomorrow, he added.

He said the Obama administration was making progress with TARP and may end up making a profit. It certainly won't be a disaster.

Some of the largest U.S. banks will remain in the government's financial bailout program for months, as officials do not expect to grant the next wave of exit approvals until near the end of the year, according to a source familiar with the matter.

Ten banks received approvals in June to repay $68 billion in federal bailout funds, but there have been few clues about when the other large banks would be allowed to exit the program.

Banks such as Citigroup Inc and Bank of America Corp have been chafing under the government's reins and want to exit the program, which delivered capital infusions to banks along with limits on pay, share repurchases and dividends.

The banks want to get out of TARP ... they will all get out of TARP, he said, adding the time frame for exiting the program is not a crucial factor.

He declined to comment on Kraft Foods Inc -- in which his Berkshire Hathaway Inc is the largest shareholder -- which is offering roughly $16 billion for Cadbury PLC. .

Buffett also said Chinese electric car and battery maker BYD Co Ltd <1211.HK> was doing well and had not sought additional investment from him.

BYD's chairman said last month that Buffett intends to raise his stake, saying the investor believed BYD came with good prospects in the renewable energy sector. He did not elaborate. MidAmerican energy Holdings, a unit of Berkshire, bought 10 percent of BYD for $230 million last September.

(Reporting by Gina Keating and Edwin Chan; editing by Andre Grenon)