Nightly Business Report June 2, 2010
Warren Buffett testifies about ratings agencies at the Financial Crisis Commission. Details
Episode: June 2, 2010
Warren Buffett testifies about ratings agencies at the Financial Crisis Commission. Susie Gharib talks to Buffett.
SUSIE GHARIB: I caught up with Warren Buffett a few minutes before he testified in front of that financial crisis panel. My question to him: do we really need credit rating agencies and should we scrap the whole system?
WARREN BUFFETT, CHAIRMAN, BERKSHIRE HATHAWAY: (INAUDIBLE) seems to think it needs it. There are kinds of people that do rely on them, including a lot of regulators. I don't need them myself. I form my own credit judgments.
GHARIB: Mr. Buffett, people just don't trust the ratings. What would you do to change and maybe improve the whole system?
BUFFETT: In the end they made a big mistake on real estate. They've made mistakes on other things over the years and I've made mistakes on credits and people will make mistakes on credits in the future. So the question is, is somebody that is right a good bit of the time useful to society and the world will decide that.
GHARIB: Senator Al Franken has an amendment. I wonder if you think it makes sense that have a government-endorsed agency that would make assignments on who rates securities. Does that make sense to you?
BUFFETT: I don't know. I would have to look at how they would staff them and who would pick them. I don't know the answer to that.
GHARIB: You're a major shareholder through Moody's and through all of the controversies and questions about conflict of interest and credibility, you held on to your shares. Why is that?
BUFFETT: We haven't held on to all of them. We have 48 million shares (INAUDIBLE) 30 million now, so we've sold 18 million shares of stock, a half a billion dollars worth.
GHARIB: But still, you've held on to them. Why so loyal to Moody's?
BUFFETT: It isn't a question of loyalty. It is a question of price of Moody's (INAUDIBLE) investments and we could be selling it tomorrow. We could be holding it for the next five years. It all depends on alternative investment opportunities.
GHARIB: What would you say are the lessons from this whole (INAUDIBLE) for you?
BUFFETT: When you have the biggest bubble in history and it pops, there is going to be all kinds of fallout.
GHARIB: You don't think Moody's is culpable?
BUFFETT: No. I think all kinds of people participated, Freddie Mac, Fannie Mae. They originated 40 percent of the mortgages in the country. It reported to Congress that they were doing that and Congress was urging them to lend money. The media, me, If I had seen it coming, I would have sold my Moody's in the '60s. The whole world participated in a delusion in effect that housing prices (INAUDIBLE) .
GHARIB: That's very interesting. Here you are testifying today. What's the message you want to get across to this panel?
BUFFETT: (INAUDIBLE) Whatever questions they ask, I'll answer them honestly, to the best of my ability.
GHARIB: As you look at the reforms that are going through Congress right now, would you say that they're tough enough? And do they protect investors against another financial crisis?
BUFFETT: I think the best thing investors can do is educate themselves and not do anything they don't understand themselves. How you get that across to people (INAUDIBLE) for 50 years and I think generally it has improved. But in the end, individuals have to know what they're doing and why they're doing it. If they don't know, they shouldn't do it. It's that simple. I'm afraid I've got to go in now.
GHARIB: One quick question just about the stock market. A lot of people are fearful investing right now. If someone came to you, said I had a few thousand dollars to invest, what would you tell them?
BUFFETT: I would tell them (INAUDIBLE) equities for 20 years. They ought to buy an index fund (INAUDIBLE)
GHARIB: That's good advice. Mr. Buffett, thank you so much.
BUFFETT: Thank you, thanks Susie.CSPAN VIDEO: Warren Buffett Testifies to Financial Crises Committee - FULL VIDEOHH
CSPAN VIDEO: Warren Buffett Testifies to Financial Crises Committee - FULL VIDEO
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