The bond insurers current distress did not arise from losses in their municipal bond insurance business, but rather from their venture into insuring CDOs and the like.

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"The world would know that, one way or the other, the municipal bond insurance problem was behind it, " Buffett said of his plan during a television interview Tuesday.

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Forcing bond insurers to hold exposure to credit derivatives while ceding good liabilities like municipal bond insurance would swamp their already over-leveraged capital bases, but save municipal bond investors, taxpayers and local governments from further losses, Spitzer said.

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