Buffett defends ratings agencies
By Stevenson Jacobs |
June 4, 2010, Friday
|
Print Edition
Print Edition
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," he said.
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. Congress is considering new rules for the industry as part of the financial regulatory overhaul.
Representative Barney Frank's legislation would get rid of laws that require businesses to obtain credit ratings. His proposal would make many business transactions less reliant on rating agencies. It would also force credit raters to register with the Securities and Exchange Commission and allow investors to sue them for assigning recklessly high ratings.
He said the agencies were among many who missed warnings signs of the crisis. "They made the wrong call," he said.
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. Congress is considering new rules for the industry as part of the financial regulatory overhaul.
Representative Barney Frank's legislation would get rid of laws that require businesses to obtain credit ratings. His proposal would make many business transactions less reliant on rating agencies. It would also force credit raters to register with the Securities and Exchange Commission and allow investors to sue them for assigning recklessly high ratings.
- About Us
- |
- Terms of Use
- |
-
RSS - |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 沪ICP证：沪ICP备05050403号-1
- |
- 互联网新闻信息服务许可证：31120180004
- |
- 网络视听许可证：0909346
- |
- 广播电视节目制作许可证：沪字第354号
- |
- 增值电信业务经营许可证：沪B2-20120012
Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.
