Warren Buffett to Bail Out Bond Insurers
Feb 12th, 2008 by Martin Lee
Warren Buffett mentioned in an interview with CNBC this morning that he has a plan to help the troubled bond insurance situation, but so far it’s not getting a very warm reception.
Warren Buffett had offered to reinsure $800 billion in municipal bonds now insured by Ambac, MBIA and FGIC, effectively giving them a AAA credit rating. Due to problems with subprime mortgages and other loans, those insurers are in danger of losing their AAA credit ratings.
This offer was made to the bond insurers last week, and they had 30 days to consider it.
Buffett says one bond insurer turned him down, and he hasn’t yet heard from the other two. Buffett wouldn’t say which company turned him down. 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.
The billionaire says this is an offer designed to make Berkshire Hathaway money, not to just do a good deed.
Buffett also answered questions on a number of other topics, including a plan from 6 financial lenders to reduce foreclosures, the Presidential election, and his U.S. dollar “worth less” comment last week in Toronto.
The interview highlights the severity of the bond insurance market, and why some financial institutions might be forced to sell their bonds.
