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Warren Buffett to CNBC: I Will Reinsure $800B in Municipal Bonds

Warren Buffett tells CNBC this morning that he has a plan to help the troubled bond insurance situation, but so far it's not getting a very warm reception.

In a live telephone call to Squawk Box, Buffett offered to reinsure $800 billion in municipal bonds now insured by Ambac, MBIA and FGIC, effectively giving them a AAA credit rating.

Warren Buffet
Warren Buffet

TRANSCRIPT OF FIRST PART OF BUFFETT INTERVIEW

TRANSCRIPT OF SECOND PART OF BUFFETT INTERVIEW

Those insurers are in danger of losing their AAA credit ratings due to problems with subprime mortgages and other loans.

Buffett tells us he sent that offer to the bond insurers last week, and that he's giving them 30 days to find a better deal.

Buffett says one bond insurer turned him down, and he hasn't yet heard from the other two. Buffett wouldn't say which company turned him down. He said he didn't think regulators could do much to force the bond insurers to accept his offer, unless they took over the companies themselves.

The billionaire says this is an offer designed to make Berkshire Hathaway money, not to just do a good deed. He is not offering to take on liability for other, riskier investments insured by MBIA, Ambac and FGIC, such as CDOs. That makes the deal potentially unattractive to the insurers, because they would be left with the 'bad' risks.


Why go public? It seems to me that Buffett is trying to put some pressure on those insurers to take the deal by talking about how the financial world would be reassured should all those bonds get Buffett's AAA backing.

New York State's top insurance regulator, Eric Dinallo, has issued a statement saying, "I am pleased that this provides one option to protect municipal bond issuers and investors."

STOCKS IN 'GENERAL RANGE OF FAIR VALUE'

During the conversation, which lasted nearly half-an-hour, Buffett also said he thinks stocks right now are in the "general range" of fair value.

He also answered questions on a number of other topics, including a plan from six financial lenders to reduce foreclosures, the Presidential election, and his U.S. dollar "worth less" comment last week in Toronto.

I'm preparing a transcript of the entire conversation, which will be posted later here on Warren Buffett Watch. Meanwhile, enjoy these video clips (in two parts) so you can hear exactly what he said.

Current prices:

Berkshire Hathaway

Ambac

MBIA

Questions? Comments? Email me at buffettwatch@cnbc.com