Posted on 12/29/2007 8:39:21 PM PST by Ernest_at_the_Beach
Warren Buffett is renting out his gold-plated name to cash-strapped cities across America so they can now borrow under his protec tive wing - and, of course, pay him dearly for the lifeline.
As the financial serv ices industry remained mired in turmoil over its own shaky credit woes, Buffett yesterday launched a new insurance company to help municipalities find insurance for backing up their bonds - of which they sell hundreds of billions to investors to finance operations.
Many major bond insurers that traditionally dominated the $2.5 trillion municipal borrowing world are on the ropes, wracked by their own credit problems and cash-flow troubles, causing cash sources from investors to dry up for many municipal and state governments.
The launch of Buffett's well-timed venture shook up the industry, and sent shares tumbling for two major municipal bond insurers - MBIA, which fell 17 percent, and Ambac Financial, down 15 percent.
Buffett's new company, Berkshire Hathaway Assurance Corp., will carry a rare, triple-A credit rating, allowing him to borrow cash more cheaply and easily than Wall Street firms, and put it to work at a much higher premium.
Even if Buffett's new company charges higher premium rates due to his "stronger and more pristine standing," hard-pressed cities and towns will benefit because they'll be able to convince investors they're safer under Buffett's umbrella which has enough cash to pay back all investors.
(Excerpt) Read more at nypost.com ...
The borrowing will continue......
the wal-mart of the bond industry.
Opportunity knocks, Warren answers. He’ll make a bundle.
oh geez I thought this was a James Bond thread!
Of course not....especially in California.
Hope he pays a ton in taxes since he always complains he doesn’t pay enough.
Wonder if he had a hand in creating this situation that he will enrich himself in.
Warren Buffett is a HILLARY lover.
The guy is smart. He supports the democrats, and never stops talking about how we should raise taxes and spend more money, which threatens the economy and makes it harder to borrow money.
Now we see why — he plans to make money off the resulting recession by “stepping in” to “save” government. The government he’s pushing to be controlled by liberals, spend more money, and need to borrow money, will have to pay HIM to get the insurance they need to borrow the money.
Sometimes I understand why Democrats think rich people are greedy bastards. It seems most of the rich people who are democrats are in fact, greedy bastards.
Yep, just follow the $$. Buffett’s grand strategy fits right in with the Left, suck up to big government as a way to feather their little nests. Buffett is one big hypocrite, that’s why he is the icon of the left.
Buffet WANTS family owned companies to have to pay the DEATH TAX, because when they CAN’T, he SWOOPS in and BUYS them!! He’s DIABOLICAL!
The market opening has been created by mistakes by the major players in this market, Ambac and the like. They had an excellent business insuring this paper, with very low losses and large savings to the localities involved. But they went after the growing market for mortgage insurance in the last five years, as the same companies. They only have so much capital, and they effectively mixed the risks by pledging their own credit in both places.
Now that they are losing badly in mortgages, and their stocks have lost 40% of their value or more, and the credit ratings of these insurers are under review for downgrading (and some already have been), Buffet's underwriters can just step in. He was not involved in the housing stuff so Berkshire's credit remains pristine.
The previous players should never have mixed the low risk business of municipal underwriting, with the higher risk one of mortgage underwriting. But they did not see the riskiness of the second of those, only a chance to write more business. Buffett is simply filling the gap that mistake created and taking away the business they imperiled by their own overreaching.
Buffett can be as wrong as you please on other matters, but here he is performing a public service and providing useful financial services at a time when the usual providers of it as stressed, in classic "white knight" fashion. He will get a good deal out of it. He deserves it.
Thank you for explaining this. I just learned a few things.
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