it seems that I completly misunderstood what the offer was. he is actually charging them to take muni off their hands. this would be a pretty healthy charge against book value of mbi and abk, stock would nosedive if dinallo forces them to do it. its problably only a matter of time till he does it, a credit line or equity injection is a quick fix but wont solve anything, the boat is leaking and grabbing a bucket wont solve the problem, there is no way the banks will take a meaninful risk there
merrill has already written it off the losses. Others will probably follow. I see abk already balked @ the offer. Although they seem to be the one willing to go to runoff vs dilution so that would make sense.
If Buffett offer is rejected, regulator may step up N.Y. department may push similar plan if bond insurer situation gets worse By Alistair Barr, MarketWatch Last update: 6:30 p.m. EST Feb. 12, 2008Print E-mail RSS Disable Live Quotes SAN FRANCISCO (MarketWatch) -- If Warren Buffett's $800 billion reinsurance plan is rejected by bond insurers, a leading industry regulator may end up pushing a similar solution, a person familiar with the situation said on Tuesday. Buffett's Berkshire Hathaway proposed reinsuring $800 billion of municipal bonds currently guaranteed by three of the world's largest bond insurers, Ambac Financial , MBIA Inc. and Financial Guaranty Insurance Co. See full story. But Buffett said on Tuesday that one of the insurers has already rejected the offer and Ambac said later in the day that the plan isn't in the interests of all its policyholders. However, if the situation gets worse, bond insurers may have no choice. If current efforts by the New York State Insurance Department to stabilize the $2.4 trillion industry fail, the regulator may propose a similar plan to Buffett's, in which bond insurers' steadier muni businesses are separated from their more troubled structured-finance business, the person said, on condition of anonymity. The New York regulator, headed by Superintendent Eric Dinallo, quickly granted Berkshire a bond insurance license late last year and invited Buffett in January to analyze bond insurers' muni portfolios, the person explained. The department's current focus is on banks and brokerage firms that are big counterparties to the bond insurers. The regulator is trying to encourage these companies to inject new capital into specific bond insurers to prevent them from losing crucial AAA ratings. But if those efforts don't stabilize the business, the department may pursue a contingency plan similar to Buffett's, the person said. That idea was echoed by a major critic of the bond insurance business who has been shorting, or betting against, MBIA and Ambac shares. "If the bond insurers turn Buffett down, as I expect they will, regulators will step in and do it themselves," Bill Ackman, head of hedge fund firm Pershing Square Capital Management LP, said during a presentation on Tuesday. Indeed, Berkshire's proposal was put together with the support of the New York State Insurance Department, according to Ajit Jain, a reinsurance executive at the company. "We are ready and willing to lend our reinsurance support to the municipal side of the house, and in fact had set out in a letter to the New York Superintendent of Insurance a concept that we believe would address the needs and concerns of main street America's municipalities," Jain wrote in a Feb. 6 letter to MBIA's bankers at Lazard Ltd. . MarketWatch obtained a copy of the letter. "The Superintendent has no objection to our approaching you with this proposal," Jain added. Still, he said that Berkshire isn't going to reinsure the structured-finance side of bond insurers' businesses, which is the source of the industry's problems.
Ross On Buffett: Deal, But No Deal Topics:Credit | Municipal Bonds Sectors:Financial Services Companies:MBIA Inc | Ambac Financial Group IncBy Andrew Fisher | 13 Feb 2008 | 08:01 AM ET Font size: Billionaire to billionaire: Warren, it won't work. Turnaround specialist Wilbur Ross said Wednesday he does not expect Warren Buffett's offer to reinsure $800 billion of municipal bond debt to succeed. "If it went through, it would be the best deal since the Dutch bought Manhattan Island from the Indians," Ross said, in an interview on CNBC's "Squawk Box." "This is the best part of the business for those insurers. It's the safest part. It doesn't do anything to get rid of the toxic waste that they had in the portfolios, both the insurance portfolio and the physical securities." In all, Buffett's offer covers about a third of the $2.4 trillion of debt guaranteed by the bond insurers. Still, Ross is glad Buffett advanced his plan because it will put pressure on regulators and others to find another solution for the troubled industry. "I think the municipal bond holders need a solution," he said. "I think they'll get a solution, and I think the one thing that Buffett's offer really will do is probably intensify the pressure on the rating agencies and the regulators to convince the financial guarantee people to resolve their issues." Buffett announced his offer to troubled bond insurers MBIA , Ambac Financial AMBAC and FGIC Tuesday on "Squawk Box." Ambac, the second largest bond insurer behind MBIA, has already rejected the offer. Ross is preparing his own plan, which he said would offer the bond insurers better economics than Buffett's within a few weeks. "We're making progress. We're getting through the due diligence," he said. "Municipal bondholders need a solution, and they will get a solution."
NY insurance chief has several remedies for insurers http://www.reuters.com/article/mark...213?rpc=44&pageNumber=3&virtualBrandChannel=0
Ambac's Chairman and CEO to Testify at House Subcommittee on February 14th, 2008 http://ir.ambac.com/phoenix.zhtml?c=80774&p=irol-newsArticle&ID=1108076&highlight= this is going to be pure comedy
NY regulator: Bond insurers may be split up Thursday February 14, 2:56 am ET By Dan Wilchins and Patrick Rucker NEW YORK/WASHINGTON (Reuters) -New York insurance regulator Eric Dinallo, who is heading up efforts to rescue bond insurers, is set to testify that he will consider allowing the companies to split their relatively strong municipal bond guarantee businesses off from the problem parts of their businesses. ADVERTISEMENT According to prepared testimony obtained by Reuters, New York Insurance Superintendent Dinallo prefers to protect all parts of the bond insurers' business, but if it becomes clear that is not possible, his first priority is to protect municipal bond issuers and investors. Reuters first reported on Tuesday that insurers could be split. Dinallo is also looking at increasing regulation for the bond insurers, including potentially looking carefully at all of an insurers' positions, the way a rating agency would. Dinallo is set to speak later on Thursday before the House Subcommittee on Capital Markets. U.S. bond insurers, which guarantee more than $2.4 trillion of securities, are expected to make billions of dollars of payouts after guaranteeing repackaged subprime mortgages and other risky debt. Those payouts may trigger ratings downgrades, force investors to sell billions of dollars of bonds, and lift borrowing costs for city governments and consumers. The bond insurer problem must be fixed, or else it could become a "financial tsunami" that wreaks havoc on the broader economy, according to separate prepared testimony from New York Governor Eliot Spitzer obtained by Reuters. MBIA Inc. (NYSE:MBI - News), the largest bond insurer in the world, is set to testify on Thursday that short-sellers are partly to blame for the decline in confidence in bond insurers, and plans to suggest regulators and lawmakers curtail the efforts of short-sellers, who profit when a company's shares decline. Regulators are working with banks, private equity firms, and others to bolster the capital levels of bond insurers and prevent downgrades. But the discussions are difficult, according to Dinallo's testimony. A group of banks is working with bond insurer Ambac Financial Group Inc (NYSE:ABK - News) on a possible rescue, while another group is working on a potential bailout of FGIC Corp. Billionaire Wilbur Ross is considering investing money in a bond insurer, and Warren Buffett said earlier this week on television network CNBC that he has offered to reinsure three bond insurers' municipal bond exposure. If strengthening a bond insurer is not possible, regulators will consider allowing the healthy municipal insurance businesses to split themselves away from the portion of the business that guaranteed repackaged subprime mortgage bonds and other troubled bonds, Dinallo's testimony says. Municipal bond guarantees account for about two-thirds of bond insurers' businesses.