Meredith Whitney calls bond insurer ultimate losses on CDO's "unknowable". Throwing into doubt the ability of regulators to come to a viable solution for bond insurers and ultimately banks. Whitney also called worst case scenario for banks "50% downside"
MBIA Advocates Severing Municipal, Corporate Units (Update1) By Romaine Bostick Feb. 21 (Bloomberg) -- MBIA Inc., the world's largest bond insurer, said financial guarantors should separate their municipal-bond units from other businesses. In one of his first actions as chief executive officer, Jay Brown severed ties to MBIA's trade group because of differences of opinion on the direction of the industry. Brown, hired this week to replace Gary Dunton, said yesterday that Armonk, New York-based MBIA may split its guarantee business in two or raise more capital as a way to address mounting losses on corporate securities that are threatening ratings on municipal bonds. In a statement today, he said ``we believe that the industry must over time separate its business of insuring municipal bonds from the often riskier business of guaranteeing other types of securities.'' MBIA also disagrees with the Association of Financial Guaranty Insurers ``on the appropriateness of monoline financial guarantors insuring credit default swaps,'' he said. FGIC Corp. of New York sought permission from regulators to split up last week. Ambac Financial Group Inc., which replaced its CEO last month, said this week it isn't planning a similar move. Ambac is ``looking to protect the rights of all policy holders,'' spokeswoman Vandana Sharma said Feb. 19. MBIA, which started as the Municipal Bond Insurance Association in 1974, and the rest of the bond insurers are paying the price for an expansion beyond municipal debt to insuring collateralized debt obligations by guaranteeing to pay the debt should the underlying securities default. CDOs package bonds, loans and other assets to provide an income for investors and are divided into varying levels of risk and return. ``It is up to us to shape our future in a way that we believe is most responsive to the markets, our policyholders and our owners, and we must do so without the constraints of participation in an industry association that does not always share our views,'' Brown said in the statement. To contact the reporter on this story: Romaine Bostick in New York at crichard5@bloomberg.net Last Updated: February 21, 2008 15:47 EST
yes but he is saying split them but allow the flow from muni to cdos, regulators are planning to split but not allow that
BOND $TALKING ACKMAN, BUFFETT WANT RISKS' REWARDS By PAUL THARP CLICK TO ENLARGE February 21, 2008 -- Like stealth tigers, billionaires Warren Buffett and Bill Ackman are moving in for the kill of the wounded bond-insurance business - but their ultimate meal could turn mean and messy. Ackman, 41, has been stalking the bond-insurance companies for years with a strong hunch they'd become broke overnight and would earn him a windfall by betting on their demise. Buffett, 77, who built a huge fortune on nuts-and-bolts insurance, has coveted the bond-insurance world's only treasure chest - its ultra-safe bets on municipal borrowing, since local governments almost never go bust. Both men yesterday won sideline assistance for getting what they're hunting in at least two of the four major bond-insurance firms on the run. New York State regulators began beating the bushes more vigorously in financial circles to keep at least the New York-domiciled prey - MBIA and Ambac - on track for the fatal blows. Those blows would come in the expected split of each bond insurer into two separate companies, based on the risk they insure. One unit would carry all the bad risk, including junk paper; the other would hold gold-plated risks of municipalities and cash-rich public entities like Port Authority. New York State Insurance Commissioner Eric Dinallo says he wants the break-up because it would yield at least four healthy companies to serve municipalities and other public debt, and remove the yoke of junk paper dragging down the bond market. Ackman is making huge bets that stocks of the companies will fall in a break-up. Buffett, meanwhile, wants to snap up the business of the cloned companies carrying only good risks, which fits into his sprawling insurance empire. As some insurers were looking to split up, MBIA late yesterday bit back, claiming Ackman's plans "contain half truths, innuendo and faulty analysis." paul.tharp@nypost.com
Moody's cuts Channel Re's Aaa rating By Alistair Barr Last update: 3:40 p.m. EST Feb. 22, 2008 SAN FRANCISCO (MarketWatch) -- Moody's Investors Service said on Friday that it has cut the Aaa rating of Channel Reinsurance Ltd., a reinsurer that backs some of MBIA Inc.'s exposures. The rating was lowered to Aa3 from Aaa because Channel Re's capital position has been weakened by its exposure to the U.S. residential mortgage market, Moody's said. "Channel Re's weakened credit profile could negatively impact the value proposition of its reinsurance relationship with its sole customer, MBIA,"
Ambac rescue may be announced Mon or Tues-source Fri Feb 22, 2008 4:02pm EST NEW YORK, Feb 22 (Reuters) - A rescue for bond insurer Ambac Financial Group Inc (ABK.N: Quote, Profile, Research) may be announced on Monday or Tuesday, a person familiar with the matter said on Friday. Ambac, the second-largest bond insurer in the United States, is facing billions of dollars of expected losses after guaranteeing bonds linked to subprime debt and other risky assets. Banks working with Ambac include Barclays Plc (BARC.L: Quote, Profile, Research), BNP Paribas (BNPP.PA: Quote, Profile, Research), Citigroup Inc (C.N: Quote, Profile, Research), Allianz's (ALVG.DE: Quote, Profile, Research) Dresdner Bank, Royal Bank of Scotland Group Plc (RBS.L: Quote, Profile, Research), Societe Generale (SOGN.PA: Quote, Profile, Research), UBS AG (UBSN.VX: Quote, Profile, Research) and Wachovia Corp (WB.N: Quote, Profile, Research). Progress has been made in recent days but a deal may still fall through. The potential deal was first reported by U.S. financial television network CNBC. (Reporting by Dan Wilchins, editing by Leslie Gevirtz) © Reuters 2008 All rights reserved
this is the real deal, ambac will be rescued by someone investing 3 billion into it and it will likely split into two. hopefully the announcement on monday will boost up the rest of the market just like it did at the end of todays trading session.
Great timing to kill the shorts. Its funny how the news was let out with 20 minutes left going into the weekend. Is it possible the news was known earlier but released at the end of the day to blast the shorts.