Interesting questions raised from The Wall Street Journal's scoop last week that Warren Buffett plans to make a buck out of the turmoil in the financial markets by establishing a bond insurance firm with the goal of giving local governments a cheaper borrowing option. The business will guarantee bonds that cities, counties and states use to finance infrastructure projects. Strategically, it's important because he's doing it at a time when when the big bond insurers are at risk of seeing their credit ratings downgraded amid the turmoil in the financial markets.

As Motley Fool points out, it will make good money. Cities and muncipalities (aka taxpayers) face higher costs because the bon insurers are likely to lose their top ratings which means they will take the opportunity to pay Berkshire's higher fees, because it will ultimately save them money on the money they borrow. Buffett's no fool.

But the most interesting part of this development is whether it will force public sector entities, which take taxpayer money, to clean up their act.

Unlike listed companies, state, county and city bond issuers don't have to provide any sort of disclosure about costs and risks. Which means the new insurer could be a force for good, says Bloomberg's Joe Mysak.

"Buffett is notoriously uncomfortable with swaps and derivatives," says Mysak. "It would be salutary if his company asked local officials to explain their own involvement in such things - why they did it, how much it cost, what their risks are - as a precondition for getting their new bond offering insured. MuniLand is currently gripped in a conspiracy of silence about swaps and derivatives, and it would be nice if someone, somewhere, encouraged some accountability in this area."

Or as The Wall Street Journal put it, the lack of transparency in government finance has resulted in a series of frauds and false and misleading statements.

"Warren Buffett's entry into the muni bond insurance market could represent perfect timing, both financially and politically," says The WSJ. "Investors can only hope he'll seek to do good while doing well. Specifically, he can help put an end to an egregious double standard. While Congress has been busy crafting still more regulations on private business, Members have ignored SEC warnings about the lack of transparency in government finance. Unlike publicly traded corporations, state, county and city bond issuers don't have to provide timely, robust disclosure or follow standard accounting practices. Yet the same Washington pols who cheerfully ratcheted up the pressure on companies via Sarbanes-Oxley apparently have no time to address shady accounting in the public sector. The recent history of government frauds from San Diego to Syracuse suggests they should make time ... For his own interest in getting repaid and for all investors and taxpayers, Mr. Buffett should lead the campaign for transparency in government finance. When state and local bureaucrats have to live under the same regulations imposed on capitalists, will the pols decide that all existing regulation is worth the cost? Perhaps. More likely the end of the double standard will bring a reasonable level of investor protection to all markets. Congress acted in 1995 to make its Members live by the same laws that they foist on the rest of us. Why should city hall get a free pass when it comes to securities laws?"

So will Buffett fix it? It's certainly going to be an interesting space to watch.