Ok, this is not the type of thing I typically cover on sharkride, but I’ve discovered something related to municipal bond insurance I think should be publicly disclosed, and potentially regulated.
My interest in this started with this article about Buffett entering the municipal bond insurance business.
Also, here’s an International Herald Tribune report about Berkshire Hathaway’s $5 billion play to insure $800 billion of municpal bonds.
Basically, there’s a reasonable argument, which says that in most cases municipal bonds should be rated AAA, even without insurance, because municipalities almost never default. From 1970-2006 only .1 % of all municipal bonds defaulted, and if rated with the same criteria as corporate bonds, 2/3 of municipal bonds would be AAA rated. So, basically, municipal bond insurance seems to be screwing municipalities, and therefore taxpayers.
So, in investigating why municipal bonds are unfairly rated, I discovered something that has not been reported, as far as I know:
Berkshire Hathaway owns 48 million shares of Moody’s, the very bond ratings company enabling the insurance companies (and now none other than Berkshire Hathaway) to make billions of dollars at taxpayers’ expense!
