Wednesday, June 2, 2010

Charles Gasparino Takes Buffett Down A Few Notches, Ruffles Liz Claman's Feathers

ZeroHedge is carrying a must-see clip of Charles Gasparino repeatedly body-slamming Warren Buffett on the Fox Business Network concerning his conflict of interest with the NRSROs, aka "ratings agencies" (partial transcript provided by Tyler Durden):
He believes [the rating agencies are] a sleazy business and he's gonna own it. Well that takes Warren Buffett down three notches in my book... If Moody's had a superior product, investors like Warren Buffett, who does not use the ratings, would be buying them one at a time. They do not have an effective product. They have a deformed product, a product that basically was at the forefront of the mess in 2008 and 2007. Warren Buffett who opines about politics all the time, constantly opines about right and wrong, defends wrong because it was a good investment. He is defending the indefensible. Rating agencies are not defensible at this. He is Mr. Do Good, yet he is defending the most corrupt business model in corporate America.
As brutal as the clip is, Gasparino wasn't done. He also penned a follow-up column at the Huffington Post where the beast-like beat down continued:
The rating agencies, as most people know, were among the chief culprits of the financial crisis, which has its roots in the housing bubble, which the raters missed as well. It's one thing to be wrong, but there is a growing body of evidence that the raters were wrong because they were paid to be wrong.

Keep in mind, the only way all those new mortgages handed out to people who couldn't repay them could be made was if the loans could be taken off the balance sheets of the banks and packaged into mortgage debt. And the only way all those countless billions of mortgage debt could be sold is if the rating agencies placed their coveted triple-A ratings on those bonds.
Gasparino's conclusion?
If Buffett is honest, (and if Angelides has the balls to press him) he will say that he doesn't rely on the ratings of Moody's or any other ratings agency because they're basically worthless. The big raters have missed every market implosion dating at least as far back as the New York City financial crisis in the mid 1970s, and continuing through the Orange County Calif bankruptcy in 1994, the bond market collapse in 1998 that led to the bailout of the giant hedge fund Long-Term Capital Management, and of course to the most recent, mother-of-all collapses, the 2007-2008 financial crisis.

If he's honest, he'll also say that he invests in Moody's (he once owned a 30 percent stake but has since been selling shares) because it's a government sponsored cartel along with its chief competitor Standard & Poor's and Fitch. The government mandates that nearly all the ratings business must go to two "nationally recognized' rating agencies. It means every bond deal that comes to market must be rating by any two of the agencies that split the massive fees on billions of bond deals each year. In other words it's a license to steal.

It's also a license to produce crummy ratings, I hope Buffett points out. Aside from bankers playing one rating agency off another, when was the last time a business cartel, created and protected by the government did anything well? Not the post office, not the department of motor vehicles and certainly not the all those Wall Street firms that were considered Too Big To Fail and went out and took so much risk they blew themselves up, and of course, our entire economy.

If Buffett really levels with Angelides he'll say there's no reason to have rating agencies and given the weight of his words, that could be the final nail in the coffin of this scam of a business.

That's if he's honest and if Angelides has the balls to ask the right question.

I'm not holding my breath on either count.
This is hard-hitting stuff for anybody to publish, let alone a mainstream journalist, in which case it's akin to a bishop telling his Catholic flock that there is no god.

Gasparino has gotten a lot of flack for his move from CNBC to Fox Business, with a lot of commentators and bloggers accusing him of promising big scoops but only delivering on being the recipient of a much larger paycheck. But with this one-two KO punch, I'm putting my estimation of Gasparino's Serious Journalist Credentials about three notches higher, to play on his negative judgment of Buffett in the video clip at ZeroHedge.

This is an inspiring trend-- not only questioning the idea of NRSROs and government-supported cartels in the financial markets, but openly accusing them of playing a deleterious role in the recent financial crisis is positive momentum toward more and more people waking up to what's been going on this whole time.

Today, the government, the banksters and the various political entrepreneur attaches, such as Warren Buffett, were on the ropes. It'd be nice if we could keep them there, but unfortunately they bribed the ref long before the title match was even being contemplated.

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