The jocular ukulele-strumming grandpa, who many years ago railed on and on against derivatives (see his 1982 letter here) then subsequently sold billions in notional of index puts against his earlier oh so sincere advice, has been formally subpoenaed, note - not invited, to testify before the Financial Crisis Inquiry Commission on the topic of "Credibility of Credit Ratings, the Investment Decisions Made Based on those Ratings, and the Financial Crisis", side by side with Moody's archvillain CEO Raymond McDaniel, the head of a company in which Buffett has (or is that had?) a huge equity stake, up until MCO's announcement it had received Wells Notice together with a recommendation to strip it of its NRSRO status, when it became obvious that Warren had been selling shares of Moody's in the period between the Notice receipt and announcement. What is most interesting is that Buffett had to be forced to participate in the hearing following a formal subpoena receipt, after he had declined participation on two prior occasions. We wonder, if in addition to unmatched hypocrisy and a guilty conscience, the octogenarian has anything else to hide?
As Fortune reports:
On May 12, Buffett, the CEO of Berkshire Hathaway (BRKA, Fortune 500), received a letter from the FCIC's executive director, Wendy Edelberg, saying that his views on a variety of subjects would be of "great value" to the Commission. The subjects, the letter said, would range from (but not be limited to) "the use and misuse of derivatives instruments, regulatory shortcomings, too big to fail, rating agencies and the shadow banking system."
To start the process, the letter said, the commission would like first to arrange a "private interview" where Buffett's views could be explored. And then, it continued, "we may request that you appear before the Commission at a hearing."
The letter said that arrangements for all this could be worked out with the general counsel of the commission, Gary Cohen.
Buffett had by that time watched some of the Commission's hearings and knew that the witnesses had mainly been people implicated in the crisis -- bankers, notably -- or charged with regulating it out of existence.
Knowing that he was in neither camp and doubtful that his testimony would indeed be of "great value," he decided to say no to this surprising invitation.
So, at his request, his assistant, Debbie Bosanek, called Cohen and said -- as she paraphrases it -- that "Mr. Buffett appreciates the invitation and is flattered by it, but he has a full plate with Berkshire and just can't do it."
Cohen was not pleased, to put it mildly. Ignoring the word "request" in the first letter, he told Bosanek sternly that "this was not an invitation but more of a command performance." He said that another letter -- "worded differently" -- would be coming.
There followed two more rounds of letters from Cohen. The first, on May 17, was indeed worded differently but signaled its general conciliatory tone by a heading that said, "Re: Renewed Request of the Financial Crisis Inquiry Commission."
Only at the letter's end did the threat come through: "We would prefer not to use compulsory process to secure your cooperation, and are sure that it will not be necessary."
But ah, it was. Buffett could by then see the likely end of this argument. But he was also determined to stick to his belief that the "private interview," followed by hearings, would neither be beneficial to anyone nor a good use of his time. So Buffett told Cohen in a phone call that he would not be volunteering to testify -- and if that meant a subpoena was in the cards, let it happen.
The subpoena -- that command in capital letters -- came on May 25. But the continuing, urgent wish of the commission to avoid coercion was contained in an accompanying letter, also dated May 25, that "respectfully" requested Buffett's testimony at a hearing on June 2 in New York City.
Had Buffett accepted the respectful request, the subpoena would have become irrelevant. But he did not accept, and the subpoena was therefore automatically served.
Amusingly, the Fortune author tends to have a rather simplistic view on the proceedings which obviously revolve around Buffett, and for which Moody's is merely a smokescreen:
Provided that the commission members ask intelligent questions and don't try to grandstand, this writer predicts that Buffett will enjoy the hearings as well. I also predict that, despite his doubts about this matter, the commission will gain from hearing his views. Most people do.
In other words, provided that the commission is "sufficiently smart" to understand that all Buffett has done is for the good and betterment of his fellow human beings, there will be no scandals. Because we know now what happens when people don't ask the right questions, and as a result end up with firms like Berskhire becoming one of the biggest beneficiaries of the greatest bailout ever conducted.
At least the article ends in a jocular tone.
After the hearing has concluded on Wednesday (and, no, this is not a joke), Buffett is set to make a quick getaway to Sing Sing Prison in Ossining, N.Y., where a graduation ceremony is being held for prisoners who have completed their college education. Buffett's sister, Doris, a philanthropist, will join him at Sing Sing, where she has done charitable work.
We don't share Ms. Loomis sense of irony, or should we say, we believe it is somewhat misplaced, as Mr. Buffett would ostensibly look and feel right at home at his post FCIC getaway.