Warren Buffet is a genius (an actual genius, not a satirical genius). His offer to Ambac, MBIA was widely portrayed as a “rescue”, but it is a calculated move to become the dominant Muni-bond insurer.
The bond insurers may in the end may be forced to do a deal like this, splitting their Mortgage securities and Muni-bond business.
In one year, Buffet will own nearly the entire Muni-bond insurance business. A very profitable, albeit slow growing business.
