Buffett Defends Moody’s

Posted by Jason | Posted in Miscellaneous | Posted on 03-06-2010


Warren Buffett was defending Moody’s by saying it was caught up in the biggest bubble he’s seen in his lifetime. Can you imagine any other watch dog group saying they were caught up in something that the group they were supposed to watch was involved in? Imagine if the FDA was promoting crack (I know. This wouldn’t be a stretch.), and then was like “We just got all caught up in the crack epidemic. It’s the biggest drug craze we’ve seen in our lifetime.”

Anyways, then Buffett says something I agree with.

But the Berkshire Hathaway Inc. chief executive expressed doubts that even radical changes to the credit-ratings industry, such as creating a government-appointed board to select rating firms, would improve the quality and accuracy of ratings.

via Buffett Defends Moody’s Management – WSJ.com.

Of course, this is always the solution from government. Give them more power. Is this just corruption in the making or what? Instead of rating agencies being chosen based on the quality of their past ratings, they will be chosen by whoever spends the most money lobbying. Look at BP and the MMS fiasco.

Only the free market can fix the rating agency system. Let the market decide which agencies are best. Large investors will not want to use corrupt rating agencies, and Moody’s will lose it’s clients. The government is not a solution here. The government will be used to keep out real competition and prevent trust worthy ratings.

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