Buffett Offers to Back Municipal Bonds
February 12th, 2008One crisis after another, They keep saving Their bacon, somehow.
The show is definitely not over.
Via: AP:
Billionaire investor Warren Buffett said Tuesday that he has offered to help out troubled bond insurers by offering a second level of insurance on up to $800 billion in municipal bonds.
In an interview on CNBC, Buffett said his Berkshire Hathaway holding company made the offer of reinsurance to bond insurers Ambac Financial Group Inc., MBIA Inc. and Financial Guaranty Insurance Co. Buffett said one firm rejected his offer, and he was still waiting to hear from the other two. He did not say which was which.
Many have speculated Buffett could step in and help out the troubled industry, though he made clear his offer was not altruistic.
“When I go to St. Peter I will not present this as some act that will entitle me to get in,” Buffett said on CNBC. “We’re doing this to make money.”
Buffett’s spokeswoman did not immediately respond to a message left Tuesday morning.
Earlier this month, Buffett said Berkshire would not invest in any of the bond insurers, but his company would consider insuring some of the risks the bond insurers had assumed.
Bond insurers write policies that promise to cover payments to bondholders if the entity that issued the bonds defaults.
Reinsurance policies offer coverage to insurance companies that want to completely or partly insure the risk they have assumed for their customers.
In recent months, bond insurers have come under fire from ratings agencies, which are worried the insurers do not have enough spare cash to cover a potential spike in claims.
Bond insurers originally offered insurance mainly to municipalities but in recent years expanded their operations to insure more profitable but riskier instruments.
That riskier debt includes bonds backed by pools of mortgages — mainly subprime loans given to customers with poor credit history. As those mortgages have increasing defaulted, ratings agencies fear the bonds supported by the troubled loans will default as well.
A spike in defaults in the coming months could force the insurers to pay billions of dollars in claims.
Late last year, Berkshire launched its own bond insurance business to take advantage of the credit problems other bond insurers have been having.
Berkshire’s new bond insuring division has a “AAA” credit rating. Buffett has said Berkshire’s new company already has done a couple of deals insuring municipal bonds.
Yes I would have to agree Kevin, the show definitely is not OVER. Not by a longshot.
Good Whitney article here:
http://www.informationclearinghouse.info/article19324.htm
Buffett has to be smelling THE BLOOD ON THE TRACKS. Among other items of interest, he called the dollar crash correctly.
That AAA rating on his insurance company? That might be the ONLY rating in the world worth its salt.
Morningstar and the rest of the gangs out there may have put the pipes (with whatever they’ve been smoking in them) down. But the financial world? I believe that they are in MAJOR DENIAL about their impending DEATH.
I for one don’t know how, but hope to have my affairs in order BEFORE THE FUNERAL.