Michael Travaglini, who oversees the Massachusetts Pension Reserves Investment Management Board, recently voiced his disagreement with California Treasurer Bill Lockyer’s plan to form a state-owned bond insurer, saying that pension funds should not be in the business of insuring securities. “I am very glad that in Massachusetts we are prohibited by our enabling statutes [from creating a bond insurer],” Travaglini said. He continued, “I’m in the investment business, not the lending business in any way, shape or form. It’s certainly not the primary mission of the fund as I see it.” Because of the ongoing problems in the bond insurance market, there have been calls (primarily from California Treasurer Lockyer) for the formation of state-owned bond insurers. Berkshire Hathaway has also stepped into the bond insurance market through the formation of its own bond insurance unit earlier this year. As the fallout from the subprime crisis continues to effect financial guaranty insurers who underwrote collateralized debt obligations (CDOs) and other risky securities and impact the bond insurance market, the calls for state-owned bond insurers may gain traction.
For background information on California Treasurer Lockyer’s plan, see our earlier post here.
