New York Insurance

Warren Buffett always two very different messages in the two capitals of influential countries of the Nation: New York and California.

At the end of last year, with the support of New York’s top insurance regulatory authorities Eric Dinallo, Buffett’s Berkshire Hathaway has a new loan insurer. Berkshire Dinallo requested to register in the game, because he was concerned that the financial well-established, such as bond insurers Ambac [ABK 5.75 -0.06 (-1.03%)] and MBIA [ MBI 12.22 0, 23 (+1.92%)], it would be more difficult for cities and municipalities to find willing buyers for their municipal bonds.

If the buyer of bonds can be trusted not to the insurance company, borrowing, demanding higher yields as compensation for the increased risk is that they do not receive their money. The increase in yields may be good for buyers, but they increase the cost of borrowing for cash geschnallt interminable Commons.

Buffett said he would be much of the insurance coverage for the year, but it is not because he thought write encryption new policy had prompted the lowest prices, they have no risk that the measures taken by insurers.

With MBIA Ambac, and there are large losses under the sub-Prime collapse, Buffett provides the possibility to use Berkshire solid financial position for municipalities borrow, what he sees as a (greater) Price .

California’s Treasurer Bill Lockyer is it different. It provides decades of history, where almost no common obligations, victims of a default. (MBIA, Ambac, and in difficulty, because they are not equipped with secure, but because it is branched in areas at risk, the back cover other loans, including the infamous Sub-prime numbers.)

Lockyer argues that the main reason for the common obligations, buyers think insurance is necessary, in most cases, because the major credit rating agencies is not to evaluate the Confederation and local authorities, debt in the same way as corporate bonds, artificially reduce the credit rating Governments.

It is now, a number of large pension funds California start their own communities compete with the bond insurers Berkshire, and tells Bloomberg and Reuters, it is not to deal with Buffett, Berkshire accuse the two stages of care credit rating.

Admittedly, it is not just the support of the Society of divided government, Berkshire Top Executive insurance Ajit Jain, and ready to recognize a certificate to be heard by the House Financial Services Committee, that “if the rating agencies on competitive conditions regarding how they Comparing rates of municipal bonds, there need a little of the financial security of the insurance market, as we know, because many municipal debt on a stand-alone and not commodities, improving the management of insurance that the cost of debt “.

This is one reason for Jain, he said “very concerned about the long-term viability of the company (deposit insurance), in general, and particularly for us.”

Perhaps the biggest disagreement between Berkshire and California, as municipal bonds are risky indeed, aid in the evaluation found that the “good” price of the insurance bond.

In his testimony, Jain argued against the “risk-free” Given the common obligations ”

“There’s barely enough story to the conclusion that it is a waste of a chance to zero in those cases, but it is the assessment that in the pricing. Admittedly, there were only a few defaults in town during the past fifty years, the Jefferson County, Alabama Vajello And, in California, both after receiving advertising in the recent past on any of their preferences obligations may only the tip of the iceberg, as municipalities have increasingly adverse economic conditions, including the reduction of real estate and distribution of tax revenue generated in the future of pensions and costs of health. ”

If California has its way and that their credit rating agencies in the public debt, Berkshire “foot of the peak” in the business and insurance bond, last May Not so long ago, so the State of clarification regarding the very small, but potentially catastrophic, the risk is widespread, the communes of the loan defaults.