Vallejo, CA. Bankruptcy, Just the Tip of The Iceberg?

Ajit Jain, head of Berkshire Hathaway's new bond insurer...

sounding like the Nattering One in testimony submitted today to the House Financial Services Committee...

Re: the bond insurers or guarantors...

we were unable to analyze the numerous complex financial transactions that made up the structured finance portfolios.

On their municipal bond side of the house, while we continued to feel that the historical pricing was inadequate...

I remain very concerned about the long-term viability of this business in general.

I am actually amazed that experts in the business continue to consider municipal bond insurance as almost a zero-loss business.

There is hardly a sufficient history to conclude that there is a zero chance of loss in this business, although that is the assessment that gets reflected in the pricing.

Re: potential governmental bankruptcy...

Jefferson County, Alabama and Vallejo, California, could just be the tip of the iceberg

as municipalities are coming under increasingly unfavorable economic conditions,

including reduced real estate and sales-generated tax revenues and underfunded future pension and healthcare costs,

that by anyone’s measure increases the risk of insuring long-term municipal obligations
.

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