Comments on: Moody’s Cuts Ratings on $5.2 Billion of Subprime-Related Bonds http://www.nakedcapitalism.com/2007/07/moodys-cuts-ratings-on-52-billion-of.html Sat, 21 Nov 2009 23:52:37 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: David http://www.nakedcapitalism.com/2007/07/moodys-cuts-ratings-on-52-billion-of.html#comment-198 David Wed, 11 Jul 2007 18:38:00 +0000 http://www.nakedcapitalism.com/2007/07/moodys-cuts-ratings-on-52-billion-of-subprime-related-bonds/#comment-198 One correction... in braod terms, at insurance companies, the amount of capital one has to hold against a bond varies with the rating.<br/><br/>0 = Treasuries<br/>1 = AAA, AA, A<br/>2 = BBB<br/>3 = BB<br/>4 = B<br/>5 = CCC, CC, C<br/>6 = Default<br/><br/>Capital charges are very small for class 1, and progressively bigger as ratings decline. There may be some states with absolute limits in junk bond holdings, but most don't. The real limits come from the amount of capital that the insurers have to hold.<br/><br/>Also, insurers to the extent that they held any of this paper, tended to hold the AAA stuff. This isn't an issue for the grand majority of the insurers, with the possible exception of the financial guarantors.<br/><br/>David Merkel<br/>Alephblog.com One correction… in braod terms, at insurance companies, the amount of capital one has to hold against a bond varies with the rating.

0 = Treasuries
1 = AAA, AA, A
2 = BBB
3 = BB
4 = B
5 = CCC, CC, C
6 = Default

Capital charges are very small for class 1, and progressively bigger as ratings decline. There may be some states with absolute limits in junk bond holdings, but most don’t. The real limits come from the amount of capital that the insurers have to hold.

Also, insurers to the extent that they held any of this paper, tended to hold the AAA stuff. This isn’t an issue for the grand majority of the insurers, with the possible exception of the financial guarantors.

David Merkel
Alephblog.com

]]> By: Anonymous http://www.nakedcapitalism.com/2007/07/moodys-cuts-ratings-on-52-billion-of.html#comment-197 Anonymous Wed, 11 Jul 2007 03:34:00 +0000 http://www.nakedcapitalism.com/2007/07/moodys-cuts-ratings-on-52-billion-of-subprime-related-bonds/#comment-197 I just found your blog recently. Quite good. One suggestion: add a time and date stamp to each post. I just found your blog recently. Quite good. One suggestion: add a time and date stamp to each post.

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