Collection: Charlie Munger - #52 'Awful Financial Behaviour In Our Leading Financial Institutions'

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In this episode, Charlie Munger was asked about the causes of the Great Recession, specifically the credit ratings agencies because it seems that it hit pretty much all twenty four standard causes of human misjudgment.

In this episode, you’ll learn:

  • What is Charlie Munger comments on U.S. financial institutions?

  • Why Charlie Munger thinks the financial behavior of leading financial institution was awful?

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Hi Mr.Munger, thank you for taking all of our questions. You mentioned earlier that when you had an opportunity to raise prices you didn’t want to raise them during the Great Recession because it didn’t seem right for Charlie Munger to be raising prices on people that were losing their houses. So I wanted to thank you for that as well. And I wanted to ask you about that –


Nobody else ever has. (Laughter)


I wanted to ask you about the causes of the Great Recession, specifically the credit ratings agencies, and your twenty four standard causes of human misjudgment. I think they hit them pretty much all. Pavlovian Association, denial –


You’re right about that. The financial behavior in our leading financial institutions was inexcusably awful. And when other people were making money in a disreputable stupid fashion, everybody piled in because they didn’t want somebody else to be making money and they’re not participating.

The standards in lending, the standards in managing – It was disgusting intellectually, disgusting morally, and of course it caused a whirlwind that could have taken the whole civilization down into a Great Depression. And that’s a pretty major sin. And none of those people’s been punished.

It’s unusual that I agree so thoroughly with Elizabeth Warren, but it was wrong to have that big of a mess and have nobody punished.


Mr.Munger, I've written a blueprint for a non-profit credit ratings agency. I'm not going to ask for your money because I understand that you're invested in Moody's.

You probably do not want to give money to a non-profit, it's going to spend some time possibly criticizing Moody's rating, but I'd love to get your feedback. It's only 10 pages, I'll hand it to your people after the event. Thank you.


What's the feedback on?


The feedback on a blueprint that I've written for a non-profit credit ratings agency. It would be a verifier of ratings issued by Moody's.


Oh well, that's very – Things that far out I usually leave to other people and not because Berkshire Hathaway owns a big chunk of one of the credit rating agencies.

But I can see why the existing situation would draw your concern. But there are some human problems I don’t want to bother with. And you have just produced one. But you’re right it wasn’t perfect.