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 solejob 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 two companies.
Mr. BUFFETT: And they sat there, made reports to the Congress, you can get
them on the Internet, every year. And, in fact, they reported to Sarbanes and Oxley every year.
And they went--wrote 100 page reports, and they said, `We've looked at these people and their standards are fine and their directors are fine and everything was fine.'
And then all of a sudden you had two of the greatest accounting misstatements in history.
You had all kinds of management malfeasance, and it all came out. And, of course, the classic thing was that after it 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 the audit committee. They didn't have a word in there about themselves, and they're the ones that 200 people were going to work every day with just two companies to think about
It just shows the problems of regulation.