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Few financial wizards can best Nebraska billionaire Warren Buffet in a money-related debate, but Phil Angelides may be one who came close.

Angelides is chairman of the federal government's newly created Financial Crisis Inquiry Commission.

The Commission wants to know what triggered Wall Street's 2007 financial meltdown that led to a three-year Recession--one of the worst in the economic history of the U.S.

Testifying at a hearing in Washington, Omaha-based Buffet defended the nation's bond ratings agencies.  Instead, he blamed the CEOs of banks that signed off on the risky residential loans in the first place.

Warren Buffet

Buffet said Moody's Investors Service, Standard & Poor's and Fitch Ratings, the dominant bond rating agencies in the U.S., shared some of the blame but not all of it, DSNews.com reports.

But it took Angelides to disclose during the hearing that Buffet's flagship company, Berkshire Hathaway, is Moody's largest shareholder.

"He dumped a heap of cash into Moody's back in 2000 and now owns 31 million shares - this from the same financial advisor who tells other investors to stick to the basics and steer clear of businesses they aren't familiar with," DSNews.com reports.

Buffet testified the managers and analysts at Moody's "made a mistake that 300 million other Americans made," by not seeing the housing bust coming.

Phil Angelides

"The credit ratings has come under heavy fire from lawmakers and regulators for assigning top credit grades to mortgage-backed bonds that later turned out to be lemons," according to DSNews.com

But in his testimony, Buffet said, "I'm much more inclined to come down hard on the CEOs of institutions" that originated the risky loans and then accepted big government bailouts.

Even though he has invested in Moody's, Buffet told the FCIC he knew little of the business of rating agencies.

"Buffet himself is known for staying on the sidelines during the dot-com boom and bust (of the 1990s) because, as The New York Times put it, he said he did not understand the industry well enough," DSNews.com reports.

But even those entrenched in the ins and outs of mortgage bond investments weren't ready for the earth-shattering downturn that hit in 2007, Buffet said.

Buffet and Raymond McDaniel, Moody's CEO, were seated side-by-side at the hearing when McDaniel told the commission the housing collapse and the economic turmoil that followed was on a scale that "many of us would have once thought unimaginable."

Raymond McDaniel

"The regret is genuine and deep with respect to our ratings in the housing sector," McDaniel testified, according to DSNews.com. McDaniel has run Moody's since 2005.

"To be blunt, the picture is not pretty," Angelides told McDaniel and Buffet.   He added, "Moody's did very well (during the financial meltdown). (However), the investors who relied on Moody's ratings did not do so well."

Angelides described Moody's ratings service as a "triple-A factory."    He said the agency assigned a top grade of AAA to 42,625 residential mortgage-backed securities (RMBS) between 2000 to 2007.

"In 2006 alone, Moody's gave 9,029 mortgage-backed securities a triple-A rating," Angelides said.

"To put that in perspective, Moody's currently bestows its triple-A rating on just four American corporations."

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