Corporate Governance

Warren Buffet Testifies on Financial Crisis

By Jim Hodgson

Further to our post of yesterday on the Financial Crisis Inquiry Commission?s public hearing on the credit rating agencies, we report that billionaire investor Warren Buffet took the stand.  His message was straightforward:  no one should be punished for missing a bubble that everyone ? including himself ? failed to see.  ?It was the greatest bubble I?ve ever seen in my life,? he said.  ?The entire public was caught up in the belief that housing prices couldn?t fall dramatically.  Very, very, very few people could appreciate the bubble.  That?s the nature of bubbles.  They become mass delusions.?

Yet someone or something was responsible for that mass delusion.  And that?s what the Financial Crisis Inquiry Commission is trying to figure out.  The credit ratings agencies are in the crosshairs, here, given their propensity to assign investment-grade ratings to risky securities.  Buffet admitted that Moody?s merely ?tweaked? its ratings models ?when they should have gone at it with a meat axe.?  Strong words from an investor who owns nearly 15% of Moody?s.  But, strong enough?

Full post as published by PomTalk on June 03, 2010 (boomark / email).