Billionaire Buffett offers to help troubled bond insurers

In an interview on cable channel CNBC, Buffett revealed that he has offered to reinsure municipal bonds now covered by MBIA Inc., Ambac Financial Group Inc. and Financial Guaranty Insurance Co. In effect, Buffett is offering through Berkshire Hathaway Inc. to insure the bond insurance companies against any losses they incur on the tax-exempt issues.

However, the offer doesn't appear to address the insurers' primary problem, which is their sizable exposure to mortgage-related securities whose values have eroded badly in recent weeks.

While municipal bonds are relatively staid with low rates of default, the mortgage-related securities have plummeted in value and threatened to rob the insurers of their prized triple-A credit ratings. That in turn has raised doubts about the insurers' ability to pay claims on any municipal bonds that might end up in default.

Buffett acknowledged that his offer wouldn't relieve pressure on the sub-prime securities known as collateralized debt obligations, or CDOs.

"It doesn't do anything for the CDOs, but I'm not sure anything is going to do much for the CDOs," Buffett said on CNBC. "We'll just have to find out how that plays out."

walter.hamilton@latimes.com