Warren Buffett has publicly stated that the United States should not have been downgraded by Standard & Poor’s. In fact, he asserted that the country would rate AAAA if such it was available.
Is Mr. Buffett correct or is he in the back pocket of the Obama administration? A former Moody’s senior vice president has now admitted that the firm suppressed its own analysts’ concerns in order to make profits. Moody’s has not downgraded the credit rating of the United States. Eric Holder has launched an investigation into these same allegations at Standard & Poor’s but not Moody’s or Fitch. This is understandable since Mr. Buffett’s Berkshire Hathaway owns 12.46% of Moody’s. Mr. Buffett thinks the US should be rated AAAA because he is trying to cover his posterior in the upcoming scandals and keep his excellent relationship with the Obama administration intact.
10. Moody’s (MCO) – Bershire Hathaway Holdings:
Holding Value: $929.2 million
Stake in Company:
If Moody’s credit rating of the United States was bought in exchange for political favors and profits, the consequences on Wall Street will be substantial.
The Moody’s credit-rating agency has been widely blamed for contributing to the financial bubble and its devastating implosion by giving high grades to dubious investments.
Now one of its own is leading the criticism.
In an 80-page letter to federal regulators, a former Moody’s senior vice president says the firm systematically squelched its analysts’ private doubts to keep deals and profits flowing.
Moody’s managers intimidated analysts who stood in the way of favorable ratings, and its compliance department harassed employees who took an independent stand, according to the former analyst, William J. Harrington.
According to Harrington, a fundamental conflict of interest permeated the firm’s culture: Like other credit rating agencies, Moody’s is paid by the very companies whose securities it is supposed to grade objectively.
“Moody’s incentivized an analyst to accede to all items demanded by an external paymaster and to work to the paymaster’s schedule,” Harrington wrote.