Buffet - Heal Thine Turd Moodys

Discussion in 'Economics' started by Trader5287, Aug 18, 2007.

  1. Mauldin has a great article on the panic this week.


    Warren Buffett Needs to Take Over Moody's

    Second, the rating agencies need to restore their credibility. Warren Buffett's Berkshire Hathaway owns about 19% of Moody's. I would suggest that Mr. Buffett step in take over the company (much as he did with Salomon years ago) and put his not inconsiderable credibility on the line for all future ratings and the inevitable re-ratings that are going to be done.

    The Panic of 1907 was solved by the credibility of one man, J. P. Morgan, who stepped in to provide liquidity. The Panic of 2007 is not a problem caused by lack of liquidity. It is a problem caused by lack of credibility. Morgan could (and did) provide liquidity. Buffett can (and should) provide credibility.

    And someone of similar stature needs to step in at S&P and Fitch. (Can Volker be summoned into the trenches yet one more time?) This is not about whether some person or group at the ratings agencies necessarily did anything wrong, although more than a few lawyers will suggest just that. This is about restoring credibility to the ratings and markets as soon as possible. Without someone new at the head, future ratings are likely to be viewed with the skeptical (and correct) question, "Is this from the same group of people who rated that bond that I bought just a few months ago that is down 50%? Why are they right now? Where is the adult supervision? Who has made sure the process is now working?"