Tuesday, February 12, 2008

Warren Buffett Offers to Insure Muni Bonds

How nice of Warren Buffett to offer to take the cream of the crop and leave the troubled bond insurers with the toxic paper.

Just minutes ago Warren Buffett told CNBC of his plan to help the troubled bond insurance situation.

In the live telephone call to Squawk Box, Buffett offered to reinsure $800 billion in municipal bonds now insured by Ambac, MBIA and FGIC, effectively giving them a AAA credit rating. Those insurers are in danger of losing their AAA credit ratings due to problems with subprime mortgages and other loans.

Buffett tesaid he sent that offer to the bond insurers last week, and that he's giving them 30 days to find a better deal.

Buffett says one bond insurer turned him down, and he hasn't yet heard from the other two. No surprise there. Buffett did not say which company turned him down and he said he didn't think regulators could do much to force the bond insurers to accept his offer, unless they took over the companies themselves.

Buffett said the offer designed to make Berkshire Hathaway money, not to just do a good deed. I doubt a "good deed" has anything to do with it as Warren Buffett is famous for buying low when people are in distress.

Current prices:

Berkshire Hathaway (NYSE: BRK.A) $139,950
Ambac (NYSE:ABK) $10.48
MBIA (NYSE:MBI) $$13.58

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