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Governments could reopen the market by guaranteeing bonds issued by banks, but they are wary of putting their own public finances at risk; this was the path that led to Ireland's ruin.
Mr. Buffett said his new bond insurance company, Berkshire Hathaway Assurance, would start by guaranteeing bonds in New York State, where regulators have promised to provide the firm with a license by Monday.
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The FHA brushed off its critics, arguing that by guaranteeing bond investors a full month's interest on mortgages, its interest rates were slightly lower than its competitors' rates.
Morgan Stanley bought protection against bond defaults from MBIA, an insurer that guarantees bonds.
However, this only applies to its general-obligation and guaranteed bonds.
It has guaranteed bonds with a face value of $124 million — debt meant to cover pension contributions to Calpers.
Before that disastrous year, she said, muni bond insurers guaranteed bonds' triple-A ratings, "so an investor didn't have to think" much about individual holdings.
Jointly guaranteed bonds sold to raise money for the current bail-out funds are being eagerly snapped up by investors.This may make financial sense.
Harrisburg is saddled with about $320 million in debt because it guaranteed bonds used to pay for repairs on a troubled trash incinerator.
One remaining possible move, resisted so far by Berlin, is for the euro zone to guarantee bonds issued by member nations.
He said the company would no longer guarantee bonds via credit default swaps, which are tradeable insurance contracts that some Wall Street experts have begun to worry about.
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