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Warren Buffett Watch
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Warren Buffett is scheduled to call into CNBC's Squawk Box Tuesday morning to talk with Becky Quick and the Squawk team about the bond insurance situation. |
Buffett will be discussing the bond insurance situation.
In late December, Buffett's Berkshire Hathaway holding company created a new bond insurer to compete with the older insurers like Ambac [ABK
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]and MBIA [MBI
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] that are in danger of losing their AAA credit ratings. (Jane Wells explains why that could be big trouble in a recent Funny Business post.)
Buffett promised that his new company, Berkshire Hathaway Assurance Corp., wouldn't make the same mistakes, specifically taking on too much risk and not charging enough to do so.
Berkshire Hathaway Assurance "tip-toed" into the New York market about a month ago, selling coverage on a $10 million bond issued by New York City.
A national group of state insurance regulators is working with Berkshire on a single "streamlined" application to sell bond insurance in all 50 states. With Ambac and MBIA in trouble, they want to make sure there's someone around to insure debt sold by governments in their state. Otherwise, states and cities might have trouble selling their bonds. Even if Berkshire did get a license for all 50 states, it doesn't necessarily mean it would begin writing coverage in every state right away.
Last week, Buffett said he's not interested in making an investment in another bond insurer, because Berkshire now has its own, although "we could have some kind of insurance transaction with them."
That dampened speculation that Buffett might come to the rescue of MBIA or Ambac. Buffett's top insurance executive, Ajit Jain, had told us back in January that Berkshire was talking with bond insurers about a possible partnership or purchase.
Berkshire's current price: [US;BRK.A
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