Buffet to the Rescue or Kicking Bond Insurers when they’re Down

Warren BuffetToday, Warren Buffet offered to buy part of the business of the three big bond insurer’s books.   He wants the good part only, keeping with his value style of investing.

http://www.cnbc.com/id/23125353

Of course, they have already begun rejecting his offer but they won’t be able to for long.   Either through formal bankruptcy or these type of asset sales, Ambac, FGIC and MBIA don’t have enough funds to meet their insurance obligations. Buffet’s offer, while salting their already damaged egos, is only being rejected because they need a bail-out to remain ongoing businesses.

As Barry Ritholtz (http://bigpicture.typepad.com/) noted on CNBC 2/12, these companies are holding high quality Municipals that they insure as a hostage for the benefit of their toxic Mortgage paper.

If Mr. Buffet, or anyone else, can buy the good paper, these companies will cease to be going concerns as the write downs will continue in earnest. Telling him no just delays the inevitable.

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