A Time For Soul Searching –Warren Buffett, Moody’s, and the FCIC
A Time for Soul Searching – Warren Buffett, Moody’s and the FCIC
In watching Warren Buffett being grilled by Phil Angelides yesterday at the Financial Crisis Inquiry Commission, I pictured what might be going through the mind of the world’s wealthiest and most admired investor. He showed his light-hearted side in answering the barbs, but there was also a sad if not pathetic tone to his replies. “I missed it too,” said he when talking about the collapse of the housing market as though it was a sufficient answer to why Moody’s abjectly failed in its job of protecting investors through its rating system. I am sure that Buffett was concerned for his public image as well as not opening Berkshire Hathaway to litigation, however, in his inner self he must have pondered how he could have played a big part in reining in the rampant abuse of public trust, after all Berkshire was Moody’s largest shareholder.
When the financial leaders of failed or bailed out institutions are in their quiet moments they must have the same thoughts. Yes, even the leaders of Goldman Sachs and Morgan Stanley may lament their lost opportunities to control the rampant abuse while piling up profits from the drek foisted off as AAA investments. They can’t admit this publicly because it would suggest culpability. Instead, however they, Buffett and Moody’s CEO Raymond Daniels took refuge in pointing at others whose sins were nearly equal.
I appreciated Angelides retort to Buffett’s response to a cover article in The Economist depicting a falling brick and the caption “The Danger of a Global House-Price Collapse”. Buffett said, yes but they didn’t have an article that pointed this out before the collapse. Angelides corrected him by simply saying: “ The article appeared in June, 2005,” – and it was months before Moody’s took official note though its downgrades.
Angelides, as at other hearings, showed his erudition and dignity. He and Senator Carl Levin are to be congratulated for their determination in digging out the truth as well as asking the questions that we would wish to pose. The purpose of the Commission’s work is to gain an understanding of why the problems occurred. Gaining the insights of Buffett is valuable in a broader sense than his governance responsibility for Moody’s, even though he appeared by summons having earlier refused an invitation.
Thanks to C-Span for providing marvelous access to these dramatic events as they are playing out before the world. It makes the job of a far away blogger that much easier and more cogent.
RL
