Buffett's bond insurer gambit no burst of altruism

By Jonathan Stempel - Analysis

NEW YORK (Reuters) - Warren Buffett's offer to support $800 billion of municipal bonds isn't a bail-out. Nor is it a fresh burst of altruism for a man donating 85 percent of his billions to charity.

It's a way for his insurance and investment company, Berkshire Hathaway Inc (BRKa.N: Quote, Profile, Research) (BRKb.N: Quote, Profile, Research), to rake in even more profits.

"When I go to St. Peter I will not present this as some act that should entitle me to get in," Buffett said on CNBC television. "We're doing this to make money ... If you put up $5 billion, you ought to make some money."

That's how much capital Buffett said he offered last week to guarantee municipal bonds now backed by MBIA Inc (MBI.N: Quote, Profile, Research), Ambac Financial Group Inc (ABK.N: Quote, Profile, Research) and FGIC Corp. He said he would insure the bonds for 50 percent more than the insurers charge, an amount that analysts said was high.

Buffett's offer was also notable for what it excluded -- risky debt, including securities tied to subprime mortgages, that has caused billions of dollars of losses for bond insurers. He said one insurer rejected his proposal, without identifying it.

If Buffett steps in, he could stabilize credit markets fearful of existing insurers losing their "triple-A" credit ratings.

This could make it tough for them to win business, and trigger widespread sales of municipal bonds, driving up states' and cities' borrowing costs and thus hurting taxpayers.

"To the extent (Buffett) has been a white knight on occasion, it has been driven by the opportunity to make a whole lot of money," said Whitney Tilson, managing partner of T2 Partners LLC in New York.