Warren Buffett said he wouldn't strip Moody's chief Raymond McDaniel of his job, arguing that neither he nor many others saw the housing bust coming.

    Financial Crisis Inquiry Commission chairman Phil Angelides asked McDaniel whether he should still be CEO of the ratings agency after its housing-related ratings performed so pathetically during the housing bubble. Angelides noted that someone looking to predict credit performance in 2006 and 2007 would have been better off flipping a coin than reading up on what Moody's (MCO) had to say.

    "It's a fair question," McDaniel replied. "If shareholders, directors and I reach a point where we don't believe I'm in the best position to lead the firm, I will not keep my job."

    No surprise there. McDaniel, who made $20 million over the past three years, wants to keep his job.

    But shouldn't Buffett, as the CEO of Berkshire Hathaway (BRKA), Moody's biggest shareholder, want to hold the CEO accountable?

    Not in this case. Buffett said he missed the housing bubble and so did 300 million others in America. It's not reasonable, he seems to argue, to dismiss someone for making the same mistake everyone else was making.

    "If I had seen it coming I would have sold my stock in 2005 or 2006," he said.

    He added that he now rues having dismissed the housing run-up of the first part of the decade as a "bubble-ette." The near collapse of the financial sector and the massive bailouts they entailed have rendered that judgment wrong. "It was a four-star bubble," he said.