主题：【港股实盘19】第19周——做好情况更加严峻的思想准备 -- 老拙

Is Warren Buffett helping the bond insurers? Or is he offering to eat their lunch?

Buffett (left) has proposed to reinsure $800 billion of municipal bonds held by the three big bond insurers–MBIA, Ambac and FGIC. But, as Deal Journal has said before, those munis may not need any insurance in the first place.

Buffett made a splash today by proposing to re-insure $800 billion of municipal bonds held by MBIA, FGIC and Ambac. One of them has turned him down, he said.

On the surface, it looks like another heroic intervention from Buffett, who memorably saved Salomon Brothers after its scandal with Treasury bonds. Goldman Sachs Group analysts estimate that Buffett’s proposal would free up approximately $6 billion in capital for the insurers, including $2 billion for Ambac, $2.5 billion for MBIA and $1.5 billion for FGIC.

But Buffett isn’t offering to do anything about the problematic structured products that are what is really dragging the bond insurers down. Municipal bonds are the crown jewels of the bond insurance business, and they are the safest, least likely to default bonds around other than Treasurys. There is a decent debate about whether munis need insuring in the first place. If the bond insurers should be trying to get anything off their books, it isn’t the core muni business; it should be the toxic structured deals that have exposure to those risky subprime home loans.

Buffett has joked that the proposal won’t exactly get him through the Pearly Gates–meaning, this is an economic decision. That is an understatement. Buffett stands to be the big winner, and not just because of the reinsurance fees this would generate. After all, Buffett in December received a New York State insurance license to open municipal bond insurer Berkshire Hathaway Assurance, which Buffett wants to move into several other states including California and Texas. In reinsuring as much as $800 billion in municipal bonds, Buffett would get the fees, a track record in the muni business for his new insurer and competitors even more weighed down by their subprime exposures.