Buffett Defends Rating Agencies

August 27, 2010 by · Leave a Comment
Filed under: Financial Crisis, General, The Rating Agencies 

Speaking at Berkshire Hathaway Inc.’s annual meeting, Chairman and CEO Warren Buffett defended the company’s maintenance of its stake in Moody’s Corporation.

Mr. Buffett said rating agencies “made the same mistake” that everyone else did in overvaluing the health of the housing market. However, he countered, Moody’s — as well as McGraw-Hill, Standard & Poor’s and Fimalac SA’s Fitch Ratings — possess strong pricing power and require little in capital needs.

“There is obviously a backlash against rating agencies,” he said. “If they are not forced to change the whole structure around them … in some dramatic way, [they are still] a pretty darn good business.”

Mr. Buffett also pointed out that Berkshire has “never paid any attention” to credit ratings for bonds. “We don’t think we should farm out — outsource — investment judgment,” he said.

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