MBIA credit default swaps have traded at junk levels for the past two weeks. However, the authorities agree that it’s still AAA material. Reality has been suspended — for now.
MBIA Defends AAA Insurer Rating, Dismisses Bankruptcy Rumors
By Christine RichardJan. 31 (Bloomberg) — MBIA Inc. Chief Executive Officer Gary Dunton said the world’s largest bond insurer has more than enough capital to keep its AAA credit rating and dismissed speculation the company may go bankrupt.
Dunton, speaking on a conference call after Armonk, New York-based MBIA reported a $2.3 billion fourth-quarter loss, blamed “fear mongering” and “distortion” for driving the company’s stock down more than 80 percent in the past year.
“It’s very difficult to see the reputation of a company you love coming under fire,” Dunton said.
MBIA is in the best position among its peers to survive the losses and downgrades on securities the industry guaranteed, Dunton said. MBIA’s capital raising efforts will exceed the requirements necessary to keep its top credit ranking at Moody’s Investors Service, he said, adding that speculation about MBIA’s holding company liquidity risk is “nothing further from truth.”
Dunton’s comments helped alleviate concerns that the company would lose its top ranking, driving MBIA up as much as 14 percent in New York Stock Exchange trading and fueling a rally in the Standard & Poor’s 500 Index. Without the AAA stamp, MBIA’s business would be crippled and ratings on $652 billion of securities would be thrown into doubt.
Not a good day for monoline-short selling Bill Ackman, that’s for sure.
Once again, political strong-arming screws over the short seller who did the quality research, in favor of the institutional behemoth that screwed up; dollar holders will pay the difference.
On January 18th 2008 Bill Ackman wrote a letter to Moody’s and the S&P regarding the monolines. Here is point #8 of Bill Ackman’s Letter to Rating Agencies Regarding Bond Insurers:
I encourage you to ask yourself the following question while looking at your image in the mirror:
Does a company deserve your highest Triple A rating whose stock price has declined 90%, has cut its dividend, is scrambling to raise capital, completed a partial financing at 14% interest (now trading at a 20% yield one week later), has incurred losses massively in excess of its promised zero-loss expectations wiping out more than half of book value, with Berkshire Hathaway as a new competitor, having lost access to its only liquidity facility, and having concealed material information from the marketplace?
Can this possibly make sense?
http://downgradetheinsurers.wordpress.com
bonds7,
Your comment looks pretty “sploggish” (spam blogger ish), but I agree with the sentiment, so … whether you can read this or not … spam on, brother. ;-)
I have been meaning to write something about splogging for a while. It’s a fascinating trend, and as a tiny blog proprietor I experience it first hand.
Sorry for the “splogging”, but it is pretty time intensive to write up an individual posts for the huge volumes of mbia/ambac stories hitting the blogging scene.
Interesting word though splogging haha
It just really makes me upset that the government and corporations would deliberately lie to the American people by reaffirming their apparent financial stability. Mbia and Ambac are not ok, they took on way to much risk by acting way to greedy and do not have nearly enough capital to stay afloat much less keep their rating. The government might move to protect the bond insurance subsidiary but the insurance holding companies will become insolvent its just a matter of time.
Moody’s and S&P rating agencies also need to take a long hard look at themselves and decide whether they want to keep their reputation or participate in this ponzi scheme that has been going on way to long.
Here is an interesting articles I came across today:
Private equity firms unlikely to rescue Ambac and MBIA
http://www.ft.com/cms/s/0/d9614eca-d2c3-11dc-8636-0000779fd2ac.html
Alright, I stand corrected. You had a very generic username combined with a blockquote from another blog and a link; sometimes I draw one too many inferences. ;-)
Anyway, I am in full agreement with you–it is a ponzi scheme, and it will unravel at some point.
Thanks for stopping by.
E