I remember reading on the 'when genius failed' that the banks were pretty damn reluctant to infuse cash on ltcm and some of them walked away. and they were in pretty damn good times back then, I'm almost convinced the meeting was not good at all today. the banks must have just made suggestions only. dinallo will of course not want to 'discuss details', if this guy had good news to report I think he would have
Well one way or the other we will find out very soon. Because I'm sure the idiots @ S&P and Fitch are getting their downgrades ready for ABK and SCA as we speak. the clock is ticking..........
Mass. Subpoena Targets Bond Insurers Wednesday January 23, 6:24 pm ET By Mark Jewell, AP Business Writer Mass. Regulator Subpoenas Municipal Bond Insurers on Mortgage Investments BOSTON (AP) -- Massachusetts' top securities regulator on Wednesday said he issued subpoenas to a pair of municipal bond insurers, seeking information on how much the firms disclosed to cities and towns about their exposure to mortgage-related investments that have recently plunged in value. Secretary of State William Galvin sent the subpoenas last week to New York-based Ambac Financial Group Inc. and Armonk, N.Y.-based MBIA Inc. He is seeking lists of public bonds in Massachusetts that the firms agreed to back by insuring repayment, and related documents. He gave the firms until Feb. 1 to turn over the documents. Elizabeth James, a spokeswoman for Armonk, N.Y.-based MBIA, said the company received the subpoena and intends to cooperate fully with the request for documents. A phone message seeking comment from New York-based Ambac Financial was not immediately returned. The two bond insurers are under review by ratings agencies for possible downgrades due to their exposure to complex investments known as collateralized debt obligations that are backed by home mortgages. "This office wants to know when and if MBIA and Ambac disclosed to bond issuers -- the cities, towns, districts and other public authorities -- that their financial condition as an insurer was being severely impacted as a result of their involvement with these highly risky securities," Galvin said. Galvin questioned whether Massachusetts cities and towns would have relied on Ambac and MBIA for financial guarantees to ensure bond investors are repaid, had the governments known about the firms' guarantees of CDOs. If cities and towns are unable to repay bond investors, insurers repay the principal and interest -- a guarantee that comes at a premium price to municipalities if the insurer boasts a strong rating from outside agencies that assess' financial strength. "Cities and towns rely on these companies in order to quickly and cost-effectively raise money for such needs as public safety, buildings and schools," Galvin said. "The market relies on the insurance provided by these companies to price the bonds and to insure that investors get paid in the event of a default. "If the credit quality of these companies comes into question, the impact on cities and towns is enormous, raising costs to municipalities and increasing investors' risk," he said. Last week, Fitch cut Ambac's rating to "AA," and rival ratings agencies have indicated they are reviewing whether to follow suit in dropping Ambac's top-notch "AAA" rating. On Tuesday, Ambac said it was discussing ways to raise the capital to boost its reserves and potentially regain a "AAA" rating from Fitch. Ambac reported a loss of $3.26 billion in the fourth quarter after contracts it issued to cover claims plunged in value. On Wednesday, shares of Ambac and MBIA rose sharply on news that state insurance regulators were meeting with bond insurers and could come up with government assistance to ensure that such insurance remains available for cities and towns that need financing. Shares of Ambac jumped $5.73, or nearly 72 percent, to $13.70, while shares of MBIA rose $4.08, or 33 percent, to $16.61. Galvin's office also recently issued a subpoena to Merrill Lynch & Co. over its dealings with the City of Springfield, Mass., which lost nearly $13 million on risky investments that soured. Among other things, that subpoena sought lists from the Wall Street brokerage firm of investments the company sold to Springfield.
George Soros, the billionaire investor, on Wednesday told the Financial Times: âI donât think it would be feasible for the US government to organise a bail-out of the monolines right now because it would be an open-ended obligation. But I do think the US and European authorities must ensure the major market makers are able to meet their counterparty obligations. Until you do that, the banking crisis will last. The authorities have to remove this counterparty risk.â David McCormick, US undersecretary for the Treasury, on Wednesday refused to comment on whether the US government would be willing to organise a bail-out. Ms Petrou says a state-sponsored bail-out would be impossible anyway. âThere is no way to do that under US law, absent a private sector rescue backed by a âwink and a nodâ of the relevant regulators,â she says. Even when the US government wants to push through a bail-out, it does not always work. The US Treasuryâs recent attempt to curb losses from off-balance sheet liabilities that banks held through structured investment vehicles (SIVs) ran aground as it failed to attract enough private sector support. Instead, banks had to bring these SIVs back on to their balance sheets, taking writedowns in the process. While the government seems unlikely to pump money into the sector and with many banks themselves struggling to raise new capital to cover holes in their balance sheets, other potential private sector investors include private equity and sovereign wealth funds as well as billionaires such as Wilbur Ross and Warren Buffett. Already, Mr Buffett is starting up a new bond insurer after New York regulators fast-tracked his licence to start business. Insurers, like most of the worldâs big banks and investors, underestimated the risks associated with complex bonds backed by assets such as mortgages. When the level of foreclosures on risky mortgages rose sharply last year, it fed through to higher than expected defaults on CDOs. Analysts at RBS estimate that triple-A rated monoline insurers guarantee $305bn of US CDOs and $88bn of non-US CDOs. Concerns about rating downgrades come as a smaller bond insurer, ACA Capital, faces insolvency after being downgraded to junk bond status last year, leading to huge write-offs. Already, Fitch has taken Ambacâs triple-A rating away from it. Moodyâs and Standard & Poorâs are widely expected to follow unless significant amounts of fresh capital is raised soon. http://www.ft.com/cms/s/0/dd4035f6-c9fe-11dc-b5dc-000077b07658.html
Banks pressed to bail-out bond insurers By Ben White, Aline van Duyn and Francesco Guerrera in New York Published: January 23 2008 20:25 | Last updated: January 24 2008 00:45 Leading US banks are under pressure from New York stateâs insurance regulator to provide as much as $15bn to support struggling bond insurers, people familiar with the matter said on Wednesday night. Eric Dinallo, New York insurance superintendent, held a two-hour meeting with bank executives on Wednesday and urged them to provide as much as $5bn in initial capital to support the insurers â the largest of which are MBIA and Ambac â and ultimately to commit up to $15bn. There is widespread concern that rating agency downgrades of the specialist insurers known as monolines could force a fresh round of writedowns by banks, which could damage already battered investor confidence. This has led to speculation that banks would band together to prop up the insurers, which guarantee payments on thousands of _billions of dollars worth of bonds issued by municipal governments and other borrowers. A spokesman for Mr Dinallo had no comment on details of the meeting. People familiar with the matter said the specifics of a possible capital infusion had yet to be decided, but contributions would not necessarily be based on how much exposure each bank has to bond insurers. Some participants in the meeting described the discussions as at an early stage. Mr Dinalloâs effort has not met with uniform support among the banks, which in some cases have their own capital-raising needs following the collapse in value of mortgage-related securities on their books. The banks also still feel stung after a failed bail-out plan backed by the US Treasury under which they would have bought assets from structured investment vehicles, known as SIVs. Wilbur Ross, the US financier who specialises in distressed businesses, said he was seriously considering buying a stake in a monoline and would make a decision on which company to back âsoonâ. He expressed scepticism that Mr Dinallo would be able to persuade banks to provide the funds. âI think itâs good that the New York insurance superintendent is coming with proactive and creative ideas for the industry but I am not so sure that he can do much to persuade banks to provide capital [to the insurers],â Mr Ross told the Financial Times.
Sounds like this whole bailout idea is a bust according to people quoted in these last 2 articles from the FT. The market will not like this news when it wakes up in the am.
16:45 ABK AMBAC Fincl: WILBUR ROSS IN TAKEOVER TALKS WITH AMBAC FINANCIAL GROUP INC, according to UK'S EVENING STANDARD - Reuters (11.33 -2.37) WILBUR ROSS TAKEOVER TALKS WITH ABK ARE SERIOUS AND PROGRESSING WELL