Buffett Tells CNBC: Demand For 'Brand Name' Credit Rating Agencies Strong

In an interview with CNBC, Berkshire Hathaway (NYSE: BRK.A) CEO Warren Buffett said that market will continue to value ratings from credit ratings agencies that have a "brand name" even when government relaxes regulations to promote competition among these agencies.

Prior to testifying under subpoena before the Financial Crisis Inquiry Commission today, Buffett told Becky Quick in a live interview that he would like to “shop around for lower prices on ratings for debt issued by Berkshire and its subsidiaries.” However, he says that Moody's (NYSE: MCO) and Standard and Poor's were "there first." and state and federal regulations endow special status to their debt ratings.

The famed investor believes that the rating agencies have formed this ‘national duopoly,’ with their credit ratings having strong pricing power. Buffett, however, pointed out that although Moody's business model continues to be impressive, the ‘bulletproof situation’ the agency had 10 years ago is missing. That is the reason Buffett's company sold some of its stake in Moody's. Berkshire is Moody's largest shareholder, although the former has been offloading its stake over the past few months.

Buffett said that he would prefer to pay much less for ratings and that the system is at an advantage with only one or two established rating agencies. In this case, the agencies would be more independent as buyers won’t have competition to obtain favorable ratings.

By 1:49 pm, BRK.A had climbed 1.86% to $107090 and MCO had rallied 2.75% to $19.83.

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