Warren Buffet has just divested itself of local govt. bond insurance. "Credit-Default Swaps" became infamous as the primary cause of the 2008 crash but all they are is a form of insurance on an investment. The problem was when insurer's couldn't pay the claims.
"“A decision by Warren Buffett's Berkshire Hathaway Inc. to end a large wager on the municipal-bond market is deepening questions from some investors about the risks of buying debt issued by cities, states and other public entities. The Omaha, Neb., company recently terminated credit-default swaps insuring $8.25 billion of municipal debt. The termination, disclosed in a quarterly filing with regulators this month, ended five years early a bullish bet that Mr. Buffett made before the financial crisis that more than a dozen U.S. states would keep paying their bills on time, according to a person familiar with the transaction. The insurance-like contracts, which required Berkshire to pay in the event of bond defaults, were originally purchased by Lehman Brothers Holdings Inc. in 2007, more than a year before the Wall Street firm filed for bankruptcy, the person said.”"http://online.wsj.com/article/SB10000872396390443855804577601413630604118.html
Moody's is thinking about downgrading all California debt or at least selectively downgrading some.
LA bankruptcy coming?