Insured by Whom?

Joe Mysak has an interesting article on Bloomberg.com about the insured municipal bond market. It seems that municipalities are still lining up to get their bonds insured by MBIA, FSA and FGIC even though these insurers are deeply exposed to the subprime market and may lose their AAA ratings:

Help me with this one. At a time when nobody really knows if the nation's major bond insurers will still be rated AAA in a couple of months, municipalities are lining up to get their bonds insured. Investors, evidently, are buying them.

Apparently, the insurers have beaten a path to Warren Buffet's door:

Warren Buffett to the rescue! On Nov. 13, the Wall Street Journal carried a story saying that the bond insurers had gone to visit Omaha, Nebraska, hat in hand, and that Buffett appeared to be interested, or at least receptive. At least there were no reports that he showed them the door.

Like Mysak, I think Buffet should probably get involved. I'm sure he will be a lot better at determining the risk of what he insures than the present crew. I hope he does because if municipalities have to get ratings based on their actual creditworthiness, I suspect some bonds are about to get downgraded. My taxes are already high enough....