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Buffett Moves Into Insuring Muni Bonds

Company will aid local governments, profit from credit crunch

By Jim O'Neill,  Newser User

Posted Dec 28, 2007 9:13 AM CST
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(Newser) – Billionaire Warren Buffett is riding to the rescue of the municipal bond market—and taking advantage of an opportunity afforded by the credit crunch—by launching a municipal bond insurer, reports the Wall Street Journal. Berkshire Hathaway Assurance, which opens today in New York state, should make it cheaper for local governments to borrow, since it will be all-but-guaranteed to have a triple-A rating at a time other insurers are at risk of being downgraded.

Experts say the company will hurt competitors who are on shaky financial ground because they expanded beyond municipal debt into mortgage-backed securities. Buffett plans to charge higher premiums than companies currently do. Insurers charge a fee to essentially pass their triple-A rating to bonds being issued for hospitals, schools and other municipal projects.

Democratic presidential hopeful, Sen. Hillary Rodham Clinton, D-N.Y., listens to billionaire investor Warren Buffett, right, raise campaign funds in San Francisco, Calif., Tuesday, Dec. 11, 2007. Buffett, who has said he would be happy with either Clinton or Sen. Barack Obama, D-Ill., as the next president, already helped Clinton...
Democratic presidential hopeful, Sen. Hillary Rodham Clinton, D-N.Y., listens to billionaire investor Warren Buffett, right, raise campaign funds in San Francisco, Calif., Tuesday, Dec. 11, 2007. Buffett,...   (Associated Press)
Berkshire Hathaway Chief Executive Officer Warren Buffett testifies on Capitol Hill in Washington, Wednesday, Nov. 14, 2007, before the Senate Finance Committee hearing on the federal estate tax. (AP Photo/Dennis Cook)
Berkshire Hathaway Chief Executive Officer Warren Buffett testifies on Capitol Hill in Washington, Wednesday, Nov. 14, 2007, before the Senate Finance Committee hearing on the federal estate tax. (AP...   (Associated Press)
U.S. billionaire investor Warren Buffett waves his hand after he arrived at Daegu airport to inspect Iscar Korea, a subsidiary of Iscar, the Israeli industrial tool manufacturer he purchased last year for US$4 billion, in Daegu, south of Seoul, South Korea in this Oct. 25, 2007 file photo. (AP...
U.S. billionaire investor Warren Buffett waves his hand after he arrived at Daegu airport to inspect Iscar Korea, a subsidiary of Iscar, the Israeli industrial tool manufacturer he purchased last year...   (Associated Press)
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What hasn't Warren Buffett invested in?
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