Standard & Poors, the ratings agency that downgraded the United States government Friday, has come under a lot of heat since that call. Some of the criticism is on point. Some of it is partisan sniping. But I noticed something about the critics:
1) One of S&P’s most quoted critics Friday was an investor who owns a competitor to S&P.
2) One Obama fundraiser went on cable on Friday night and attacked S&P for downgrading the administration.
3) One billionaire takeover master was widely quoted for his critiques of S&P’s accuracy, even though he has publicly said on other occasions he likes it when the agencies misrate securities, because he makes money off of it.
4) Finally, there was a critic who makes money off of tax loopholes and government spending who was uncritically quoted on S&P.
All four were the same man — Warren Buffett.
Buffett utterly dismissed S&P’s ratings, telling Liz Claman of Fox Business Network, “In Omaha, the U.S. is still triple A. In fact, if there were a quadruple-A rating, I’d give the U.S. that.”
This quote circulated widely, with almost nobody mentioning Buffett’s various conflicts of interest. I don’t actually disagree too much with Buffett, especially because he suggested that we might simply repay our debts by printing money — what I call “default by inflation.”
I think nobody else could get away with this sort of elder-statesman treatment with all his conflicts glossed over.
1) Buffett’s Berkshire Hathaway, last I checked, owns 12.5% of Moody’s, the prime competitor to S&P. Would someone who owned one-eighth of Microsoft be uncritically quoted beating up on Apple?
2) Buffett hosted a fundraiser for Obama in 2007, and served as an official economic advisor to the campaign. It seems relevant, when S&P’s downgrade is likely to reflect negatively on President Obama (I can say that without arguing who actually deserves blame), to mention that Buffett, attacking the downgrade, is an Obama booster.
3) Here’s Buffett last summer:
So,when you’re listening to a man who profits from misrating of securities, you might wonder if he’s being forthright about which securities he thinks are misrated.
4) The very first tax credit on the table in debt-reduction talks is the ethanol credit. Buffett says he’s considering investing in ethanol giant Archer Daniels Midland. Buffett’s also considering a big buy in the country’s No. 4 federal contractor, General Dynamics. He’s also made a killing of betting on bailouts. Seems he has a vested interest in opposing the sort of sacrifices S&P says the U.S. government has to make.
I guess being a Democratic billionaire means never having to state your conflicts.
[update: I had originally written “liberal billionaire.” I changed it to the more accurate “Democratic billionaire.]
