Warren Buffet Wrong About Moody’s
Warren Buffet testified before Congress that Moody’s rating agency should not be blamed for its enormous role in the financial collapse that occurred following the blow up in the real estate market and the subsequent implosion of collateral mortgage options, or CMOs. These securities eventually became the so-called toxic securities that continue to weigh down the balance sheets of many financial companies. Buffet is not dumb nor is he being led to say certain things by Berkshire Hathaway’s large stock holding in Moody’s. Rather, Buffet is saying that Moody’s and the other rating agencies including Standard and Poors and Fitch can’t be held responsible since what they missed is the same thing that everyone else missed. In other words, they weren’t any worse than anyone else. The problem with this line of thought is that the whole point of Moody’s business is that it knows MORE THAN EVERYONE ELSE. Otherwise, what is the point of paying them to rate securities. If Moody’s role in the securities industry is nothing more than the corroboration of information that others have already figured out, then what is the point of what they do exactly? Don’t forget that numerous investment concerns including pension plans, …