Buffett Moves Into Insuring Muni Bonds

Company will aid local governments, profit from credit crunch
By Jim O'Neill,  Newser Staff
Posted Dec 28, 2007 9:13 AM CST
Buffett Moves Into Insuring Muni Bonds
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,...   (Associated Press)

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. (More Warren Buffett stories.)

Get the news faster.
Tap to install our app.
X
Install the Newser News app
in two easy steps:
1. Tap in your navigation bar.
2. Tap to Add to Home Screen.

X