Billionaire investor Warren Buffett’s wallet got a little lighter this week after shares of Moody’s Corp. declined more than 14 percent in the past three days.
The drop followed news that Uncle Sam sued rival S&P for $5 billion over wrongdoing in rating mortgage securities.
Buffett’s Berkshire Hathaway owns almost 13 percent of Moody’s. That means Buffett suffers a $220 million loss in value this week.
On Monday, Attorney General Eric Holder sued S&P in a Los Angeles federal court for allegedly dragging its feet on downgrading toxic mortgage securities ahead of the housing collapse.
Warren Buffett’s Moody’s holdings are thinner after Uncle Sam targeted rival S&P for “egregious” wrongdoing in grading mortgage bonds.
S&P inflated the ratings to please the banks and securities firms that created them because they were the ones who paid the ratings fees, it is charged.
The lawsuit seeks up to $5 billion in penalties, which would wipe out all the profits of McGraw-Hill, S&P’s parent, over the last seven years.
Moody’s, the nation’s second-largest ratings agency, and its smaller rival, Fitch, have at least temporarily been spared Uncle Sam’s wrath. But they could be next in line if the government succeeds in squeezing out a sizable settlement or judgment against S&P, experts said.
Berkshire Hathaway is Moody’s largest investor, with a stake of 12.75 percent, regulatory filings show. It has pared that investment in recent years to 28 million shares, from 48 million in 2009.
Moody’s closed yesterday at $47.49, an $8-a-share drop from Friday’s close.
As a result, Buffett’s stake is worth about $1.3 billion, down from about $1.5 billion at the week’s start.
Buffett is the world’s fourth-wealthiest person, with assets of $52.3 billion.
McGraw-Hill shares are down more than Moody’s.
M-H closed yesterday at $44.61, down 23 percent since Monday.
S&P has called the lawsuit “meritless” and vowed to “vigorously defend” itself.