Buffett Says Bond Insurers Don't Deserve AAA Rating

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May 4 (Bloomberg) -- Billionaire Warren Buffett, whose Berkshire Hathaway Inc. has begun competing with MBIA Inc. and Ambac Financial Group Inc. to insure municipal bonds, said some rivals don't deserve their AAA credit ratings.

Credit-rating firms shouldn't be giving top grades to bond insurers that borrow money at 14 percent or whose stock has dropped 95 percent, Buffett said at a press conference today in Omaha, Nebraska, a day after Berkshire's annual meeting.

If there's been a similar case of a company retaining its AAA rating after the stock plunged from $96 to $4 in a year, Buffett said, "I've yet to see it.''

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Buffett created his bond insurer in December after state regulators sought to help governments get coverage when losses jeopardized the AAA ratings of bond insurers MBIA, based in Armonk, New York, and Ambac, based in New York. States and municipalities buy bond insurance to raise the rating on their debt, which reduces the interest rate and saves taxpayers money.

Bloomberg