Amazing!  The positive news continues to pile up.  Now, Warren Buffet wants to reinsure all of the Municipal bonds insured by Ambac, MBIA, and FGIC.  Why is this such a positive? 

First, even if they do not accept, it shows confidence in those bonds.  Municipal bonds are the core business for those firms.  They got in this trouble by pressure to diversify their business and they started to insure mortgages in the 1990s.  Bad decision.  At least a bad decision keeping the same corporate structure.  End result of reinsurance? AAA ratings on all Munis is intact.

Second, and more importantly, it shows confidence in the underlying economy by Buffet.  Why?  Because if Warren thought the economy was going to implode further he would realize that municipalties revenues would be reduced thereby increasing the risk of some defaulting on their debt.  He realizes that may happen to some, but the revenue from the reinsurance must outweigh any losses from any slowing growth in the economy; with a hefty premium knowing Buffet.

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