Buffett Offers Aid on Bonds, but at a Price

By VIKAS BAJAJ
New York Times

Warren E. Buffett volunteered on Tuesday to rescue Wall Street from its latest looming crisis.

But Mr. Buffett, the billionaire investor known as the Oracle of Omaha, made clear that his offer would not come cheap. And even then, jittery investors were unsure that his plan would work.

Capitalizing on the turmoil in the financial markets, Mr. Buffett offered to shoulder some of the financial burdens of three insurance companies whose plunging fortunes have become a threat to the financial system.

The companies — MBIA, the Ambac Financial Group and the Financial Guaranty Insurance Company — guarantee interest and principal payments on hundreds of billions of dollars of bonds sold by states and municipalities, as well as complex mortgage investments. Investors fear that the deepening problems of the bond insurers could unleash a chain reaction of losses across financial industries.

Mr. Buffett said he would stand behind, or reinsure, policies that the three companies had written on $800 billion of municipal bonds, a move analysts called a shrewd attempt to take advantage of the companies’ problems. His holding company, Berkshire Hathaway, is willing to commit $5 billion to the task but wants the insurers to pay it a steep premium. Berkshire will refuse to take any risks associated with mortgage-related securities, the riskiest debt that the companies insure. Mr. Buffett made his offer public on CNBC, the financial news network.

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