Posted on 03 Jun 2010
Berkshire Hathaway's Warren Buffett had defended rating agency Moody's against criticisms that it misled investors by giving overly positive ratings to mortgage-related investments.
Testifying before the Financial Crisis Inquiry Commission in New York yesterday, Buffett said that rating agencies, which came under fire for giving triple-A credit ratings to mortgage bonds, should not be held responsible for failing to spot that the bonds were junk.
Buffett said the rating agency was just one of many that failed to predict the collapse of the US subprime mortgage market.
“The entire American public eventually was caught up in the belief that housing prices could not fall dramatically. Freddie Mac believed it, Fannie Mae believed it, Congress believed it, the media believed it, I believed it,” Buffett told the commission.
“[The rating agencies] made the wrong call. Look at me I was wrong on it to. I recognised that something pretty dramatic was going on in housing, but I actually called it in the annual shareholder meeting a bubblette. That was a terrible term to use. It was a four star bubble,” Buffett added.
Raymond McDaniel, CEO of Moody’s, who is testifying alongside Buffett, said: "Moody's is certainly not satisfied with the performance of our credit ratings for the US residential mortgage backed securities and related collateralised debt obligations over the past several years. Indeed it has been deeply disappointing"