Buffett Defends Agencies for Missing Meltdown

Daily Herald (Arlington Heights, IL), June 3, 2010 | Go to article overview

Buffett Defends Agencies for Missing Meltdown


Byline: Stevenson Jacobs Associated Press

NEW YORK -- Billionaire investor Warren Buffett on Wednesday defended credit rating agencies that gave overly positive grades to mortgage-related investments before the housing bust. He said the agencies were among many who missed warnings signs of the crisis.

"They made the wrong call," Buffett acknowledged.

But he said he counted himself among those who failed to foresee the collapse of the housing bubble. Buffett called it the "greatest bubble" he had ever seen.

"The entire American public was caught up in a belief that housing prices could not fall dramatically," Buffett told a congressionally chartered panel investigating the financial crisis.

Had he known how bad it would get, Buffett said he would have sold his company's stake in rating agency Moody's Corp.

Buffett's investment firm is Moody's largest shareholder. He testified before the Financial Crisis Inquiry Commission alongside Moody's CEO Raymond McDaniel. The FCIC is a bipartisan group created by Congress to examine a range of issues surrounding the financial crisis.

Rating agencies have been criticized for giving high ratings to complex investments backed by risky mortgages. When homeowners defaulted, the agencies downgraded billions of dollars of investments at once. That helped spark the financial crisis.

Lawmakers have accused the industry of having a conflict of interest because the agencies are paid by the banks whose investments they rate. …

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