In discussing how Moody's could have been so wrong, in hindsight, about credit ratings on mortgage-backed securities, Buffet said that 300 million other Americans also made the same mistake - including himself.
One of the fallacies behind the desire for giving regulators more power is that somehow regulators didn't have enough authority to stop banks from making bad loans in the run-up to the financial crisis. The various bank regulators have a great deal of power to change the behavior of banks under their jurisdiction - but there is no reason to believe that a regulator will have greater insight into the quality of a mortgage or other investment than the market or Warren Buffet.
In other words, if a brilliant investor like Warren Buffet doesn't see a bubble, why would you think a regulator will see it and, moreover, demonstrate the tenacity to stop what market participants otherwise believe to be reasonable investments?
The real cause of the crisis was the Fed's deeply accommodating monetary policy, and the government's push to get Fannie Mae and Freddie Mac and banks operating under the Community Reinvestment Act to increase lending to weaker credit risks.
None of that is being addresses in the financial regulatory legislation in Congress.
The real cause of the crisis was the Fed's deeply accommodating monetary policy, and the government's push to get Fannie Mae and Freddie Mac and banks operating under the Community Reinvestment Act to increase lending to weaker credit risks.
None of that is being addresses in the financial regulatory legislation in Congress.
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