MonoBuffett

There's still probably some confusion about who and what the monolines are: The Economist wrote a good piece last year (which I had to reread not so long ago) but in brief: monoline insurers, with AAA ratings themselves, insure the repayments of bond issuers therefore lowering the cost of borrowing for the issuers. Then they got greedy and started insuring not boring municipals but structured products. (Yes, exactly...)

What's interesting is that Warren Buffet is getting really stuck in - According to CNBC he signed up 100+ munis last week in 2 days alone.

He recently made a nice public statement about the desirability of the safe muni side of it by making that audacious "bid" for MBIA and AMBAC's good stuff - here's the reaction, again on CNBC, from AMBAC to that original proposal.

So, with Warren Buffett's AAA standing available, who is actually going to go to (or stay with) MBIA and AMBAC now? (And how much will a $3bn injection help anyway? I thought Dinallo said $15bn for the industry?) Instead of buying the good part of the businesses off MBIA and AMBAC, he's just going to take it.

If AMBAC's $3bn gets signed in the next couple of days, I expect there will be a rally and then a selldown - the problems out there are not just about monolines!