Warren Buffett testified yesterday before the Financial Crisis Inquiry Commission along with Moody’s Chairman and CEO Raymond McDaniel. The purpose of the hearing was to probe the failure of the rating agencies to accurately rate securities associated with subprime housing loans during the real estate bubble. Was he too easy on Moody’s? Read this article for one opinion.
Standard & Poor’s has downgraded its long-term counterparty credit rating on Berkshire Hathaway to AA+ from AAA. The action also lowered the financial strength rating on Berkshire’s insurance operations to AA+. The ratings were removed from Standard & Poor’s credit watch and now have a stable outlook. Standard & Poor’s action comes only weeks before Berkshire Hathaway is set to release results for 2009 which will almost certainly indicate thatbook value ended the year at a record high. Read this article for more details.
Those who followed politics in the early 1990s will recall the impact that “bond market vigilantes” had on the Clinton Administration’s fiscal policies. Will credit rating agencies replace the bond market as a form of fiscal discipline in the years to come? Read this article for more information.
Morningstar has announced the launch of its corporate credit ratings initiative which will initially cover 100 companies with plans for expansion to 1,000 companies as additional credit analysts are hired in the coming months. As we have discussed in recent months, the economic moats of the established credit rating firms such as Moody’s and Standard & Poor’s has continued to shrink in light of multiple high profile ratings failures during the financial crisis. Read this article for more details.
The Wall Street Journal has reported that certain debt issuers, including Heineken N.V. and Credit Suisse Group, have been able to sell bonds without obtaining traditional credit ratings on the securities: While small in scope so far, the deals indicate