Buffett denies Moody’s flagged bad bonds

NEW YORK – Billionaire investor Warren Buffett on Wednesday told the Financial Crisis Inquiry Commission that concerned executives from Moody’s Corp. didn’t tip him off to problems with bonds that Moody’s had rated highly, directly contradicting evidence presented privately to the panel.

Testifying before the panel mandated by Congress to find out why the financial world quaked in 2008, Buffett – the largest shareholder in Moody’s – denied ever being warned.

“No,” Buffett said, responding to a question from panel chairman Phil Angelides about a McClatchy Newspapers report earlier this year that two senior Moody’s officials had warned Buffett about complex bonds backed by junk U.S. mortgages. He also said he had no idea how Moody’s rated bonds.

“I’ve never been in Moody’s. I don’t even know where they’re located,” Buffett said.

But a former Moody’s executive stands by what he told McClatchy Newspapers earlier this year: that he’d given panel investigators documentary evidence about his contact with Buffett.

“I reached out to him, and I’ve got the e-mail sent to him, and the commission has it as well,” the former senior executive said Wednesday. He requested anonymity to protect his current job, which isn’t with Moody’s.

McClatchy Newspapers independently verified the executive’s information.

Whether Buffett was aware of problems at Moody’s is important because as the firm’s largest shareholder and a larger-than-life figure in the investment world, he was in a position to push for changes. There’s also the question of whether he had inside information unavailable to the public.

Buffett, through his company, Berkshire Hathaway, at one point owned more than 20 percent of Moody’s. He’s since pared his investment to about 13 percent.

Angelides got Buffett to admit that he wasn’t aware whether Moody’s investigated the quality of the mortgages that were pooled into the complex bonds that it gave investment-grade ratings.

Angelides scolded Buffett for his lack of curiosity about the workings of a company in which he was the largest shareholder, asking him, “If we can’t count on corporate shareholders, then who can we count on?”

Buffett defended mistakes made by credit-rating agencies such as Moody’s, whose job is to signal risk to bond investors by rating the quality of the securities. Moody’s gave top investment-grade ratings to many mortgage-backed securities, but many proved to be junk, triggering the financial crisis that sent the U.S. economy into its worst tailspin since the Great Depression.

Buffett said he doesn’t rely on ratings given by Moody’s or other credit-rating agencies.