Wall Street Manna

An irreverent look at Wall Street

Tuesday, February 12, 2008

Buffet offers to insure FGIC, ABK, and MBI's muni's

The insurers have a 30 day firm offer from Warren Buffett to take all the municipals off their balance sheets. So far, they have declined.

This reminds me what Pimco's Bill Gross had to say:

"How could Ambac, through the magic of its triple-A rating, with equity capital of less than $5bn, insure the debt of the state of California, the world’s sixth-largest economy? How could an investor in California’s municipal bonds be comforted by a company that during a potential liquidity crisis might find the capital markets closed to it, versus the nation’s largest state with its obvious ongoing taxing authority?"
http://www.ft.com/cms/s/0/bb7e80c8-d58c-11dc-8b56-0000779fd2ac.html

Buffett's move would strengthen the "insured" muni's which have taxing authority, and allow the monolines to use the capital they have for their more "esoteric" products. Give the good to Buffett, the bad they keep. Rather Darwinian, but effective.

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