Business

MOODY’S BUFFETT-ED BY ALLEGATIONS

Cries of foul arose yesterday against Warren Buffett after the powerful credit-rating agency Moody’s Investors Service – in which he’s the largest shareholder – began pulling the rug out from under his rival insurers to force them into “egregious” deals with Buffett.

Allegations of conflicts came from insurance industry sources as the credit crisis deepened over fears that insurance guarantees trading widely on Wall Street – basically private IOUs backing trillions of dollars of bonds and junk paper debt – could become almost worthless.

Last week, the Oracle of Omaha rode to the rescue of the bond-insurance crowd, saying he’d shoulder some of the guarantees himself using his own insurance empire, but only for a very high price. He also would cherry-pick the best insurance bets for himself and leave the failed books of business behind in company shells.

Most bond insurers rejected Buffett’s costly help, with analysts predicting yesterday that splitting the insurers’ businesses into “good” and “bad” assets would trigger a legal battle lasting years.

The fees Buffett would charge are a stunning 150 percent of the premium the bond insurers were already charging their own clients.

Moody’s – in which Buffett owns 19 percent – has put at least four bond insurers on notice that if they want to keep their pristine credit ratings, they’ll have to either pile more cash onto their ledgers or use a bailout like that offered by Buffett.

Also, New York Gov. Eliot Spitzer has told insurers they must either break up or face regulatory action from the state.

Last night, The Wall Street Journal reported that Ambac Financial Group is discussing a plan to raise at least $2 billion in much-needed capital to help the world’s second-biggest bond insurer retain its top-notch credit rating.