On Friday, credit-rating agency Fitch downgraded monoline MBIA. AAA to AA might not be such a big leap, but itâs all the more galling in light of the spat between MBIA and Fitch a few weeks ago. Readers may remember that MBIA asked Fitch to withdraw its rating on the monoline, in the process rather underhandedly slighting the rating agencyâs abilities and approach. Fitchâs clever, dignified and stinging response was to continue rating the monoline gratis. But the downgrade isnât just sour grapes. Fitch says MBIA is short of its AAA institutional capital targets by $3.4bn to $3.8bn, even with current capital raising efforts considered. Further, âsubprime riskâ has not been stabilised and there are significant questions facing the security of MBIAâs $30.1bn exposure to CDOs, including $8.7bn in CDO-squared (a security banks like Merrill Lynch have written down to 0) All of this should again raise significant questions about the ratings assigned by the S&P/Moodyâs duopoly to the monolines. Will it? Probably not. http://ftalphaville.ft.com/blog/2008/04/07/12105/fitch-downgrades-mbia/
Moody's will downgrade Fitch, Standard & Poors will downgrade Moody's, Meredith Whitney will downgrade Standard & Poor's and on and on and on.