If you’ve often wondered who regulates those who give credit ratings – and who owns them – then read on. The Slog investigates the Moody’s downgrading of France’s rating….and concludes that both Berkshire Hathaway and the Unites States have everything to gain from it.
Yesterday evening CET, Moody’s Investors Service downgraded the sovereign credit rating of France by one rung. Chief among Moody’s concerns was somewhat vague – ‘the nation’s medium-term growth outlook’ – although it’s a view I share. Moody’s changed its outlook for France to stable from negative, and the cut was one rung from Aa1 to Aa2. That still leaves French debt, given the Moody’s terminology, as ‘prime, low-risk investment’. But it will, of course, make it more expensive for the French government to borrow money. Hold that thought.
These are the biggest shareholders in Moody’s:
BH’s biggest source of income and profits is insurance. Insurance sector commentators AM Best rank BH sixth among global reinsurers as measured by gross premiums written – behind Munich Re, Swiss Re, Hannover Re, Lloyd’s of London and Scor.
In recent months, Warren Buffet has been steadily withdrawing from French positions. Hold that thought too.
Buffet has been in the (re)insurance sector for a long time; talk to those who are knowledgeable about it, and they will tell you without exception that the bloke is a genius whose grasp of risk is without equal. But with the wacky world of financialised capitalism about to go sky-facing mammories, it’s going to be a bumpy ride for everyone: and Buffett’s Berkshire Hathaway is no exception. BH crosses thresholds that should ensure its designation – with more than $50bn in assets and more than $3.5bn of derivatives liabilities – too big to fail.
But spookily, that hasn’t happened. Indeed – as the FT noted earlier this year – ‘British regulators have challenged their US peers over their apparent reluctance to subject Warren Buffett’s Berkshire Hathaway to tougher scrutiny as part of a worldwide push to make the financial system safer….The Bank of England has written to the US Treasury asking why Berkshire’s reinsurance operation — among the world’s most powerful — was left off a provisional list of “too big to fail” institutions drawn up by the Financial Stability Board…’
Being an All-American Boy, our Warren is clearly patriotic and on-message enough to get all the protection he needs from US regulators. That’s one more thought to hold onto.
And talking of his patriotism, take a quick peek at where the solid basis of Mr Buffett’s longer-term investments lies – those incredibly far-sighted and patient long-holds that deliver massive payback to BH:
Hold it up to the light, not a foreign company in sight. Whichever way you cut it, Warren Buffett’s Berkshire Holdings is a 24-carat loyalty investor in American global business imperialism.
He is a stalwart for Walmart. A copious Coca Cola drinker. A gem for IBM. The man who backs Goldman Sachs. And of course – for the last fifteen years – doing his duty for Messrs Moody.
Put simply, Buffett has everything and more to gain from yet more foreign nations joining the list of those poor suckers who cannot fart without American permission. Don’t worry too much about your holdings in myriad thoughts: I’ll be repeating them anon.
Moving on: we saw how Wolfgang Schäuble went beyond tumescence once Syriza caved in and let his eurogroupie agents complete an illegal takeover bid for Greece, while helping themselves to vast profits from the privatisation rush now unfolding there. But Wolfie doesn’t care much for money: he’s a geopolitical sort of chap who wants his (ie, Germany’s) armlock control over Fiskalunion eurozone members to be total and unyielding. And he has on several occasions made it clear in private that Greece was merely a dry run for his lifetime target: the punishment of France for its wayward fiscal economics. In the Elysée Palace, nobody in the Hollande administration has the slightest doubt that this is Wolfstrangelove’s goal.
Former Fed Treasurer Tim Geithner admitted to intimates that the Obama Administration and the US State Department has “bet the farm on Germany when it comes to sorting Europe out”. In that context, Brussels-am-Berlin has been an obedient servant of the United States in terms of giving aid to Ukraine, pressuring Poland to accept the euro, and demonising Hungary’s Viktor Orban. George Soros (who has much to gain from a neoliberally run Eastern Europe) has been up to his eyes in this strategy. But in terms of his commitment to US multinational domination of the planet through megabrands, nobody has been a more loyal agent of State, the CIA, and Wall Street than Warren Buffett. That’s the final thought to hold…now for some of the dot-joining thing.
Mr Buffett is a patriot, US brands investor and major player in the insurance business. He is also the biggest institutional investor in Moody’s. Lest we forget, I am far from being the first commentator to doubt the squeaky-clean image ratings agencies like to garner for themselves: the US Justice Department sued Standard & Poor’s and its parent McGraw Hill in February 2013, charging that the largest credit rater, S&P, bent its criteria to win business from banks. Although Moody’s has not been charged by the U.S. government, Greenlight Capital boss David Einhorn called credit rating brands “ruined” in 2011 for their role in “helping precipitate the worst recession since the 1930s with faulty credit ratings”. And in using the word ‘faulty’, Einhorn was being both kind and careful.
Now let me enumerate my doubts. They may not be factual in any single case: but they cast doubt on the wisdom of allowing those with commercial and geopolitical agendas to have any control whatsoever over what conclusions ratings agencies do or don’t publish.
- Berkshire Holdings earlier this year pulled out of its one major lingerie investment in France. It holds very few insurance positions for French companies. Buffett is a patriot who would rather see Germany in control of the EU, and France converted to a more American model of society. So when it comes to the French sovereign credit rating, he has two conflicts of interest: lost confidence in France would damage his insurance sector competitors, and provide support for German hegemony in Europe.
- Making it more expensive for France to borrow money is an ideal catalyst towards the achievement of that goal.
- Buffett’s obvious self-protection power within US regulatory circles raises the possibility that he enjoys a quid pro quo with Washington: they go easy on his TBTF risk, while he uses his contacts to ensure that EU nations are weakened in the run-up to US commercial colonialism.
- Last but by no means least, so total is his Berkshire Holdings’ dependence on US global brand revenue for existence, Warren Buffett’s entire fortune would be at risk if he didn’t follow a general policy of ensuring, to the maximum degree possible, the continuation of US brand domination of consumer choice.
None of this makes Buffett ‘guilty’. But in any system claiming to offer a level playing field, his large stake in Moody’s ought to be completely unacceptable, and forbidden by law.
I am not postulating a conspiracy; rather, I am saying that we cannot have the complete objectivity of regulators being in any doubt whatsoever.