Bond Insurers

It looks like there is a proposal to split up the bond insurers. I'm not particularly surprised by this development. If MBIA and Ambak took Buffett's deal, it would effectively have split them up anyway.f Buffett offered to take the Muni portfolio of the three major bond insurers. By taking that portfolio, they would be left with their CDS and CDO positions that would have likely bankrupted the firms. I would much rather prefer these companies to take Buffett's private offer than to be forced to split up. However, if they do not split up voluntarily, it is fairly clear that they will be forced to split up whether it is part of a bankruptcy agreement or outright. Municipalities won't put up with interest rates that high and not being able to borrow money and will complain up the chain of government until it gets done. The new firms holding the Muni insurance might be worth examination of whether to buy. I'm guessing that the other part will declare bankruptcy, there could be a situation where it would be a VERY distressed play. If it isn't liquidated in bankruptcy it would likely be severely undervalued coming out of bankruptcy.