Warren Buffett has just told CNBC that Berkshire Hathaway has offered to reinsure $800bn of muni bonds insured by monolines Ambac, MBIA and FGIC.
But one monoline has already turned him down.
Crucially, of course, Buffett hasn’t offered to reinsure the most toxic, troubled insurance on CDOs, so it’s not yet clear whether Buffett’s offer will actually save the bond insurers and allow them to keep their AAA ratings.
Warren Buffett tells 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.
In a live telephone call to Squawk Box just a few minutes ago, 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 tells us 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. 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.
Why go public? It seems to me that Buffett is trying to put some pressure on those insurers to take the deal by talking about how the financial world would be reassured should all those bonds get Buffett’s AAA backing. 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.