Warren Buffet offers Bond Insurance for Safe Muni Debt: Finance Trading Times

Warren Buffet offers Bond Insurance for Safe Muni Debt

It’s Warren Buffet to the rescue – the great economy problems of US don’t seem to have an end, so the world’s richest individual has offered to help.

Warren Buffet has offered to provide re-insurance to government backed municipal bonds which are approximately worth $800 million.

Warren Buffett's offer to reinsure $800 million worth of municipal bonds gave the stock market the much required kick, and the Dow Jones index went up by more than 100 points. However, it's still uncertain whether this offer will be accepted by the firms or not.
Warren Buffett told CNBC that his Berkshire Hathaway holding company made the bid to bond insurers Ambac Financial Group, ABK, MBIA MBI and Financial Guaranty Insurance.
Buffett said one of the firms rejected his offer and he was waiting to hear from the other two. Ambac late Tuesday said that it turned down his offer.


This appears to be a good move, but the problem is that the market experts have a different view: They claim that Buffet is going after the comparatively safer bonds. If he is so much interested in taking the trouble out of US economy, then he should do something with the mortgage backed securities, which are causing the major problems to the US economy as well as the world economy. Some even claim that this may be the infamous strategy of Buffet to buy into the state owned bond firms.

Cathy Seifert, an equity analyst at Standard & Poor's (NYSE:MHP) , says Buffett's offer doesn't even address the main problem.
Shares of Ambac and MBIA went down by around 15% each following the offer from Warren Buffet.

Interestingly, Warren Buffet is not the only one with big money to come and offer the so-called help in the form of insurance.
Last month, there were rumors that another billionaire Wilbur Ross may go for a bid for Ambac.
However, just having Buffett’s name involved may restore confidence into the troubled financial industry requires it desperately.
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1 Comment: Post your Comments

VIJAI said...(on 28 February 2008 at 11:34 )  

Warren is a true business man. As analyst said, the interest is increase is stalk in the market by means of helping at the same time getting more out of it..

As a business man, what he did is right but might not the whole factor to help the bond insurer which is why nobody took is deal.

Afterall, because of that the market went up some 100 points that day..

VIJAI

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