moody's was a aaa factory. in 2006 alone moody gave 29,000 companies a aaa rating to put that in perspective, moody's currently bestows its aaa rating on just four american coorations, even berkshire hathaway with i more than $20 billion cash on hand, doesn't make that grade. we all know what happened to those aaa securities. in 2006, $869 billion of securities were aaa rated by moody's. 83% went on to be downgraded. investors relying on pension funds suffered heavy lses. now many of the witnesses we've heard from over the course of our investigation whether it's bankers or regulators or the chairman of the federal reserve has said there was no way they could have foreseen the steep nationwide decline in housing prices we've experienced. i spect we may hear more of that today, but, of course, there were warning signs. the attempts by many states to stem the tide of deceptive and predatory mortgage practices, the 2004 fbi warnings abt mortgage fraud, and most of all the fact that housing prices had shot up an un

of moody's investor service. later, we'll hear from other officials from moody's. this focuses on credit agencies which assess the financial products. many of those gave high ratings to financial products consisting of subprime home mortgages which declined dramattcally in value. the financial crisis inyirey commission is a bipartisan group created by an act of congress. >> we will now come back into session. we'll begin on the credibility of the credit ratings, the decisions made and the financial crisis. this second session is credit ratings and the financial crisis. we are joined today at the witness table by mr. warren buffet, the chairman and c.e.o. and mr. raymond mcdaniel the chairman and c.e.o. of moody's corporation. thank you for being here. i'd like to start by doing what is customary for all witnesses in all proceedings. i'd like to ask you fwotesdz stand and be sworn. please raise your right hand. do you solemnly swear under penalty of perjury that the testimony you are about to provide will be the truth, e whole truth, and nothing but the truth, to th

it seems to me -- i want to go back to at happened at moody's to some extent. 100 years ago,ohn moody started trading railroad bonds which you know a lot about. they are relatively simple instruments. now they are raiding complex instruments. maybe i should turn to mr mcdael is on this question. somef the -- some of them are skewed in favor of your property rating. inour pricing, i have learned from our investigation, our nds on residential mortgage-backed securities, you [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] and 3.50 basis points for the tranches that were rated subordinated. it seems you should put less in the supported tranches. it is similar to a difficulty that we discovered in the mortgage-brokerage situation where mortgage brokers were sometimes compensated at twice the percentage rate for generating a mortgage that had a higher interest rates payable to the lender than a traditional mortgage which then incentivize them twice as much to direct borrowers into sub-prime mortgages and -- to otherwise may ha

it seems to me -- i want to go back to what happened at moody's to some extent. 100 years ago, john moody started trading railroad bonds, which you know a lot about. they are relatively simple instruments. now they are raiding complex instruments. maybe i should turn to mr. mcdaniel is on this question. some of the -- some of them are skewed in favor of your property rating. in your pricing, i have learned from our investigation, our nds on residential mortgage-backed securities, you charged basis points on this and that were rated senior and 3.50 basis points for the tranches that were rated subordinated. it seems you should put less in the supported tranches. it is similar to a difficulty that we discovered in the mortgage-brokerage situation where mortgage brokers were sometimes compensated at twice the percentage rate for generating a mortgage that had a higher interest rates payable to the lender than a traditional mortgage which then incentivize them twice as much to direct borrowers into sub-prime mortgages and -- to otherwise may have qualified for traditional mortgages. mr. mcdan

one of moody's largest shareholders.his is two hours 20 minutes. >> we are going to been the second session of our hearings and decisions made based on those decisions made during the financial crisis. we are joined at the witness table by mr. warren buffett, the chairman and ceo of berkshire hathaway and the chairman and ceo of moody's corporation. i would like to start, thank you for being here. i would like to start by doing what is customary for all witnesses. how would like to ask you to stand and be sworn. please raise your right hand. do you solemnly swear under penalty of perjury that the testimony you are about to provide will be the truth, the whole truth, and nothing but the truth, to the best of your knowledge? >> i do. >> we will begin by offering both of you the opportunity to make an opening statement of no more than five minutes. >> i have no statement. >> good. that will cut five minutes. we will take your opening statement and go right to questions. >> thank you. good morning. my name is ray mcdaniel. i

beca since you asked the qution rhetorically i'll actually jump in andnswer with an answer from the moody's economist tat s. hlkeer refred to whahe said wod have happed without the recovery t, without the tarp legisltion, witht mang sure that we grabol the ller ofhiecony, what he says would he happened is we uld have absolutely sunk into depressn. that we ld have literal the picies of president bama and thedership the congress and sate stred oush ay. mr. tonko: swean see these v formations that downrd, straight line impact that could hae kept gng but and direion and now we're aske by our colleagues in the house onhe other side it not quick enough. how co taking -- we've made wonderful recovery here. we've spp the bleeding and we'r climbing upward. yoknow, t analogy used by the presidenwhere, younow, ey e the caintohe dch and then it took a tough bi eort to pull that car out of the ditch and they're sayi, give us back the key. we, you kn, i think the public is nownderstanding that very faile polici were governing our economy. ibrout downit broht amera to her knees, and we saw thlack of regul

how i moody's investor can reduce the odds of another credit meltdown. the financial inquiry commission is going to be having a hearing in new york today to look at the role of credit ratings. mr. buffett is going to be testifying there. we will have live coverage starting at 8:30 eastern time this morning on c-span 2. mr. buffett, when he testifies later on this afternoon we will content -- continue the coverage on c-span 2 as well as c-span radio. next phone call, a plymouth, massachusetts. go ahead. caller: it is truly said that americans have turned to this position of wanting their hands held. they need to put their hands together and get to work and do something. both parties are equally guilty of various, sundry things. we must do something. in defense of c-span, the people calling in to criticize c-span of being a balanced, please. c-span is a wonderful treasure. the problem with c-span is the people calling in. it has turned into a fight between federal hillbillies and innocent handy. host: mike, independent line. caller: this is such a ridiculo

mark moody stewart himself said to me last night, the former chairman of shell, former chairman of theanglo-saxon mineral coal co., whatever -- he was talking about the early 1950's, when the british parliament and the burning of coal in open fireplaces. of life would collapse, yet within three years, no one burn coal in open fireplaces. it was a regulatory decision by a responsible governing body that set the standard. also with regard to this question, and i do want to pitch some of the questions to john, because it is his area of expertise. the definition of leadership -- taking responsibility to enable others to cheap purpose in the face of uncertainty. what is certain is that blowing up mountains is not appropriate. that must stop. some of the other technologies, i frankly think or little less uncertain then this questioner put forward. has anyone read ban jones'-- van jones' amazing book? >> i think right now, with regard to the development of renewable energy technologies, that the questioner asked, nuclear, wind, solar, things we have not even dreamed up yet. this is our specia

warren buffett said moody's does not deserve special blame for not seeing the housing market collapse. his berkshire hathaway owns a stake in the firm. at&t and limits on web data, what it means for internet usage in the future and pricing, also on their front pages this morning. below that, on publishing, the future of the book as vanity press goes digital. this is telling us, much as blogs been in and to news business, youtube, television, now a powerful new nation of books threatening the industry. george, independent line. your biggest concern war were repaired caller: the morning, susan. good morning all intelligence c- span watchers. the last caller took all the wind out of my sale. i just agree with her 100%. a big farmer, oil, wall street, insurance companies have bought the best government taken by a -- big pharma. next on my list is top six is nuclear proliferation, especially with iran and north korea appeared north korea it is going to be really a problem. host: all right, george, thank you for your call in being a part of the discussion. gary duncan tweets -- t is a call

the chief economist for moody's estimates that cutting the tax rate for corporations get to only 32 cents and stimulus for every dollar you spend. for every dollar on state aid, you get $1.41. let me give you the phone numbers. republicans -- 202-737-0001. democrats -- 202-737-0002. and independents -- 202-628- 0205. the senate was working on legislation that included unemployment benefits, a fix for medicare rates for doctors, and they left town only addressing the doc fix for doctors that see medicare patients. included in that bill was $24 billion in medicaid money to help states balance their budgets and $23 billion more to prevent layoffs at a local school districts. the senate comes back and is slated to address those issues, including unemployment benefits. we want to hear from you about whether or not you think the federal government should even be providing aid to states. scranton, pennsylvania. republican line. good morning. caller: i think people need the help, should get the help, but i think there are a lot of people out there on unemployment and are not even trying to get jo

frr mark zandi, chief economist from moody's, a chief economist feels like the light switch went on in businesses this spring. when you take it all together, the response to the recession was massive, unprecedented and ultimately successful. you have a broad spectrum of agreement, mr. boccieri from the economists who say the policies that have put us on the right track. mr. altmire. mr. altmire: i want to reiterate in the district that i represent just across mr. ryan's and mr. boccieri's districts, the similar experiences that are happening in pennsylvaniaaas well and we had a choice to make in 2009 when we as members of this house had to make a decision as to what to do when we were looking off the cliff into the aayss with an economy that was on the verge of collapse in a verr literal sense. we could have done nothing or more of the same. those were two of our options and there were people on the other side of the aisle who wanted to take that approach, to continue to pursue the policies ttat led us to being in that position in the firsttplace, but we chose not to do that. we chose

between the credit rating agencies like moody's and standard and poors and the banks that employ them to rate them. will there be a tight fenceline that is laid between them? or will it simply be finessed. i gather that mr. perlmutter has come to the floor, congressman perlmutter, very good, we'll give you two minutes system of this issue of, is conflict of interest addressed in the bill and shuts the door tight between the rating agencies and the banks, is it sufficient? members have to weigh whether it is or not. next i'd like to turn to derivatives. this is where wall street really created money whether there's no underlying value. you can check this in your own community because now a majority of mortgage loans in this country are actually the home is not worth as much as the loan is valued at. they call that under water. they so overvalued real estate through the derivative instrument and through the way that the loan was leveraged through the bonding of the security, we're all paying the price for this now as home values start to go down and this year, another $-- another 2.4 mi

sm the whole crisis was compounded by the different ratings agencies like standard ann poors and moody's. they were not a.a.a. but a lot of trouble waiting to happen. so the real estate crisis drug the financial market in trouble so they couldn't deal with the situation that occurred. following that, president obama's elected and the economy's going down. so he proposes a series of solutions and things that hopefully are going to make things better. and part of the solution was a whole lot of taxes and a whole lot of spending. and so his policies started out, first of all -- actually started out with the stimulus package. stimulus package with one of these things that was supposed to help us get some jobs. and he told us what we're going to do with the stimulus package, it was originally $787 billion, but as it turned out, $800 billion in the stimulus package. here's what was said by the president about our stimulus plan. we'll likely save or create three million to four million job. 90% will be created by the private sector and 10%, public sector jobs. this looked like a pretty good dea

but sudenly the credit model starting thus whether from the credit rating agencies, s&p, moody's, fitchetc, feeney and reddie, the essentially were backards looking at loan level performance to get a look at how did individuals historically performed with this particular ltv, this particular credit score and really ignore the macrofactors tt should have been examined in that market. can we fully expect 8228 mortgage to continue to rform this way if x% of the market also has to and that's driving whatev pcent of the sales are taking place. theriskased capital models for fannie and freddie. it's not well understood but those models that were put forward by the regulator did not include credit scores. they did not include documentation. so that if fannie and freddie r to make a 90 fio or vantage score alone with no income documentation, the risk based capital standing on that loan was exactly the same as making a 80 kert is core loan fully documented. and that is still the case in the regulation of the state so that capitalstdards with fannie and freddie aga did not increase the way that o