Colin Barr

Following the money in banking, economics, and Washington

Buffett still smarting from downgrade

June 2, 2010: 2:08 PM ET

Warren Buffett mostly defended Moody's Wednesday, but he hasn't forgotten the rating agency's decision last spring to downgrade his company.

Buffett, the billionaire value investor who runs Berkshire Hathaway (BRKA), testified before the Financial Crisis Inquiry Commission Wednesday on the problems afflicting Moody's (MCO), the rating agency in which Berkshire is the biggest shareholder.

Opposes micromanaging

Panelists led by FCIC chairman Phil Angelides pressed Buffett repeatedly pressed Buffett to explain why he didn't take a move active role overseeing Moody's after evidence of the firm's ratings failures came to light.

Buffett shrugged off Moody's poor performance during the housing bubble, saying few people understood the scale of the coming meltdown. He also rejected the notion that he as a major shareholder should have played the watchdog, saying he didn't see evidence of "systemic failure" at Moody's or its rival S&P.

He also said he wasn't "in position to evaluate the internal controls" at Moody's or the other big portfolio holdings of Berkshire, such as Procter & Gamble (PG) or Johnson & Johnson (JNJ). Buffett stressed he doesn't worry about details, saying, "I don't know how they make Tide."

None of this is to say he believes Moody's is perfect, however. It is clear Buffett hasn't forgiven the firm for last April's decision to yank the triple-A rating Buffett clearly believes the firm still deserves.

S&P, as it happens, still rates Berkshire triple-A. He said he believes Moody's "misrates us" and should upgrade the company.

Moody's "has been diligent" in its dealings with Berkshire, Buffett said. But chuckling, he added, "there's always room for improvement."

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Colin Barr
Colin Barr
Senior Writer, Fortune

Colin Barr has covered finance for Fortune.com since November 2007. Previously he was a writer and editor for TheStreet.com, winning a 2006 Society of American Business Editors and Writers award for "The Five Dumbest Things on Wall Street," and for Dow Jones Newswires. He is a 1991 graduate of Penn State and lives in Port Washington, N.Y., with his wife Meena Bose and their two kids.

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