Wall Street WARZONE

Buffett Resign? Yes, Credibility Shot Defending Rating Agencies. Massive Conflicts in “Too-Greedy-Too-Fail” Stock in Moodys & “Goldman Conspiracy!”

by Paul B Farrell, JD, PhD
| | 6/16/2010

Yes, he should resign, probably won’t. But something’s definitely wrong with his defense of the credit rating agencies, especially since his 20% ownership in Moody’s is a clear conflict of interest that taints his credibility. Reuter’s Felix Salmon says Buffett’s testimony before the Federal Crisis Inquiry Commission was a “PR Disaster.” Buffett claimed he made “a mistake like virtually everyone in the country made.” Wrong, ol’ Uncle Warren is not like “everyone else.” Worse, he should have been in there with all the other leading critics who between 2000 and 2007 were warning of a subprime credit meltdown coming. See my June 2008 summary of those warnings: “20 reasons new megabubble pops in 2011: Greed blinded us to subprime meltdown, it’ll blind us next time too.”

That’s why ol’ Uncle Warren’s defense of the credit rating agencies is so unAmerican, lacking true leadership character. Here’s the diagnosis I made of his problems when he was defending Moodys, Goldman and the rest of the corrupt Wall Street banks earlier in my MarketWatch column: ”Buffett defends Goldman, joins Greed Conspiracy: Uncle Warren strums ukulele, in denial of Wall Street’s toxic business model.” A few key points: Ol’ Uncle Warren has a bad case of denial. Remember, not too long ago Buffett was calling derivatives “weapons of financial mass destruction.” And yet, there he was on stage at his Berkshire shareholders annual love-fest defending Wall Street’s most toxic companies, trapped in denial, defending the greedy culture that got America into its current mess:

  • Praising Moody’s “business mode,” and by inference all rating agencies that rubberstamped Wall Street’s toxic debt, setting up the last meltdown …
  • Defending Goldman Sachs bad behavior despite the fraud suit and a possible criminal indictment (while hiding his own conflicts-of-interest as a big investor in both Moody’s and Goldman) …
  • Praising Goldman’s CEO Blankfein, Wall Street’s greediest fat-cat banker who paid himself $68 million of his stockholders profits last year …
  • Defending Goldman with a bizarre argument that Goldman is no more guilty than the other Wall Street banks, a tacit approval of the bad behavior of all Wall Street banks in the Goldman Conspiracy …
  • Worse, ol’ Uncle Warren also tried deflecting attention from Wall Street’s corrupt business model by blaming government regulators for the meltdown, another example of Uncle Warren’s blind denial, ignoring the fact that in the past year Wall Street spent over $400 million on lobbyists and campaign cash to make absolutely certain regulators, Congress and the Obama team all played along with Buffett’s songs that guarantee Wall Street controls Washington regulators.
  • Ironically, all this comes from a man who once lectured Congress on “Moral Integrity: I want employees to ask themselves whether they are willing to have any contemplated act appear on the front page of their local paper the next day, read by their spouses, children, and friends … Lose money for my firm and I will be understanding; lose a shred of reputation for the firm, and I will be ruthless.”

Yes, Buffett’s in denial … just like his banker buddies … like his friends in Obama’s White House … so short Buffett, short Baby Berkshire, short Goldman, short Moody’s. Why? Because they’re all “shorting America” piling on debt that’s pushed our debt-to-GDP ratio to 92%, past the IMF’s 90% danger zone. (more) Sorry Uncle Warren, but your credibility is shot, maybe you should resign.

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