He may not be willing to bail out the bond insurers and their ticking C.D.O.'s, but Warren Buffett is willing to do business to help them out.

Buffett told CNBC this morning that he had offered the troubled bond insurers to reinsure as much as $800 billion in municipal bonds. He made the offer to MBIA, Ambac Financial, and Financial Guaranty Insurance Corp. One turned him down and he is waiting to hear from the other two, he told CNBC

The offer, which has a 30-day window, is only for munis. The bond insurers would keep their portfolios of collateralized debt obligations and credit default swaps.

Stocks surged after Buffett's comments, although the chances of a deal actually happening are slim to none. But the news about the troubled bond insurers, and the potential aftershocks for banks, has been so dire of late that any positive sign will apparently be seized by investors. As one blog's thinly veiled sarcasm headlined the news: "Warren Buffett Has a Plan to Save the World." 

What bond insurers need is some way to offload liability on their insurance on toxic credit derivatives. They don't need help on their muni portfolio. The muni business, as long as they can somehow keep their triple-A ratings, is the only thing that will turn them around in the long run.

As Jon Ogg says on the 24/7 Wall St. blog, the bond insurers would "be giving away their top operations to feed their leeches."

For the municipal-bond insurance has long been a very lucrative business. By extending the umbrella of their triple-A credit rating, the bond insurers provided a guarantee to states and municipalities that issue bonds, allowing them to pay a lower interest rate.

But as Jesse Eisinger describes in the March issue of Condé Nast Portfolio, the bond insurers "made a terrible mistake," getting involved in credit derivatives and structured-finance products in the pursuit of greater profits.

So now the bond insurers are in trouble, and their triple-A rating is at risk. And Buffett is stepping in. At the invitation of Eric Dinallo, New York State's top insurance regulator, Buffett has set up his own bond-insurance business in New York. His first deal was insuring $10 million of New York City bonds in the secondary market last month, according to the Bond Buyer.

But the question is whether municipal-bond insurance is even necessary.

"The reason that the business can be so rewarding is that government bonds are intrinsically safe," Eisinger says. Municipalities almost never default, for one. "The entire business of muni-bond insurance is a giant taxpayer rip-off."