New York, June 2 (IANS) Billionaire investor Warren Buffett Wednesday defended the role of credit rating agencies during the global financial crisis, saying they got it wrong while rating the US mortgage debt just like others.
Testifying before the US Financial Crisis Inquiry Commission (FCIC), Buffett supported the basic business model of the rating agencies accused of giving high ratings to risky mortgage-based debt despite downturn in the housing market.
He said that the ratings agencies were caught by a decline in housing prices that few saw coming, Los Angeles Times.
‘They made a mistake that virtually everyone in the country made,’ Buffett said, adding, ‘It’s difficult to think of another model’.
Buffett owns 17 percent shares in Moody’s Investor Service, one of the three major ratings agencies that have been accused of helping to precipitate the financial crisis with inflated ratings on securities.
Eric Kolchinsky, a former employee at Moody’s, testified that the agencies were compromised by a business model in which they were paid by the banks looking for good ratings.
