BECKY QUICK: If you imagine where things will go withFannie and Freddie, and you
think about the regulators, where were the regulators for what was happening,
and can something like this be prevented from happening again?
Mr. BUFFETT: Well, it's really an incredible case study in regulation
because something called OFHEO was set up in 1992 by Congress, and the sole
job of OFHEO was to watch over Fannie and Freddie, someone to watch over them.
And they were there to evaluate the soundness and the accounting and all of
that. Two companies were all they had to regulate. OFHEO has over 200
employees now. They have a budget now that's $65 million a year, and all they
have to do is look at two companies. I mean, you know, I look at more than
BECKY QUICK: Mm-hmm.
Mr. BUFFETT: And they sat there, made reports to the Congress, you canget
themon the Internet, every year. And, in fact, they reported to Sarbanes and
Oxleyevery year. And they went--wrote 100 page reports, and they said,
`We'velooked at these people and their standards are fine and their directors
arefine and everything was fine.' And then all of a sudden you had two of the
greatestaccounting misstatements in history. You had all kinds of management
malfeasance,and it all came out. And, of course, the classic thing was that
afterit all came out, OFHEO wrote a 350--340 page report examining what went
wrong,and they blamed the management, they blamed the directors, they blamed
theaudit committee. They didn't have a word in there about themselves, and
they'rethe ones that 200 people were going to work every day with just two
companiesto think about. It just shows the problems of regulation.
The full interview can be found here.