Buffett Offers to Save Municipal Lenders

Stocks rally, but companies may rebuff opportunistic Hathaway
By Kevin Spak,  Newser Staff
Posted Feb 12, 2008 2:39 PM CST
Warren Buffett, chairman of Berkshire Hathaway, speaks in this file photo. (AP Photo/The Canadian Press, Ashley Hutcheson.   (Associated Press)
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(Newser) – Warren Buffett rode to the rescue today, though the color of his horse is in question. The Sage of Omaha offered to reinsure $800 billion worth of municipal bonds, resolving “in one stroke of a pen” the jitters plaguing the municipal debt market. But his plan is also a bid to gain one-third of the debt-insurance market, and one insurer has already rejected him, Bloomberg reports.

Reassured traders lit up Wall Street, but analysts were skeptical. Buffett would be backing up bonds for MBIA, Ambac Financial, and FGIC, which are all in danger of losing their essential AAA rating. But he’d be omitting subprime-related debt, taking “the fattest, most profitable part of their business,” one analyst said. “I can’t imagine why they would want to do that.”