Comments on: MBIA: The (Rating) Agency is Not Amused http://www.nakedcapitalism.com/2008/02/mbia-rating-agency-is-not-amused.html Sun, 22 Nov 2009 01:53:05 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: np http://www.nakedcapitalism.com/2008/02/mbia-rating-agency-is-not-amused.html#comment-3635 np Sat, 02 Feb 2008 05:26:00 +0000 http://www.nakedcapitalism.com/2008/02/mbia-the-rating-agency-is-not-amused/#comment-3635 Why does everyone continue to portray the Muni business as "solid"<br/><br/>CDO's were good investments 2 years ago too<br/><br/>Munis are going to start defaulting in droves due to decreased property and sales taxes, etc<br/><br/>Buffett will have a chance to price for these new defaults <br/><br/>Ambac and MBIA and the others have not.<br/><br/>The bailouts will never end -- if they get by this shoe dropping, many more will follow Why does everyone continue to portray the Muni business as “solid”

CDO’s were good investments 2 years ago too

Munis are going to start defaulting in droves due to decreased property and sales taxes, etc

Buffett will have a chance to price for these new defaults

Ambac and MBIA and the others have not.

The bailouts will never end — if they get by this shoe dropping, many more will follow

]]> By: Yves Smith http://www.nakedcapitalism.com/2008/02/mbia-rating-agency-is-not-amused.html#comment-3627 Yves Smith Fri, 01 Feb 2008 22:06:00 +0000 http://www.nakedcapitalism.com/2008/02/mbia-the-rating-agency-is-not-amused/#comment-3627 newsman,<br/><br/>The issue is that this is almost certain to be throwing good money after bad. Even though a downgrade of the monolines would be very damaging, the amount required to save their ratings (and we don't mean for the next six months, but for good) appears by any reasonable calculation to be so large as to not be worth it,<br/><br/>Remember, the worst outcome is not to have the downgrade happen, if you are an investment bank. It is to throw a few hundred million at this problem and still have the bond insurers get downgrades, merely later.<br/><br/>As we noted above, Ackman's estimates aren't the worst out there. And the amount to save an AAA rating HAS to be greater than the amount needed to cover expected losses. Need to have a big cushion to warrant an AAA.<br/><br/>s,<br/><br/>There isn't anything inherently wrong with muni bond insurance, except the reason it is a good business for the insurers is that the rating agencies grade municipalities tougher than corporates for the same default risk. newsman,

The issue is that this is almost certain to be throwing good money after bad. Even though a downgrade of the monolines would be very damaging, the amount required to save their ratings (and we don’t mean for the next six months, but for good) appears by any reasonable calculation to be so large as to not be worth it,

Remember, the worst outcome is not to have the downgrade happen, if you are an investment bank. It is to throw a few hundred million at this problem and still have the bond insurers get downgrades, merely later.

As we noted above, Ackman’s estimates aren’t the worst out there. And the amount to save an AAA rating HAS to be greater than the amount needed to cover expected losses. Need to have a big cushion to warrant an AAA.

s,

There isn’t anything inherently wrong with muni bond insurance, except the reason it is a good business for the insurers is that the rating agencies grade municipalities tougher than corporates for the same default risk.

]]> By: s http://www.nakedcapitalism.com/2008/02/mbia-rating-agency-is-not-amused.html#comment-3626 s Fri, 01 Feb 2008 21:50:00 +0000 http://www.nakedcapitalism.com/2008/02/mbia-the-rating-agency-is-not-amused/#comment-3626 I also don't see what's so wrong about munis shelling out an insurance premium to lower their borrowing costs a few bps, as long as the insurer is sound and the muni is only a little less sound. Warren Buffett apparently doesn't see anything wrong with this either.<br/><br/><br/>Ok lets make it simple - muni gets lower cost of funding, buffet gets a risk freee premium and the bond buyer gets a lower yield. great for everyone but the investor and comncerned citizen, as that subsidy is facilitiating the destruction of your capital in the form of future taxes (borrowing). I'll skip the discussion of the treasury market, but you get the drift I also don’t see what’s so wrong about munis shelling out an insurance premium to lower their borrowing costs a few bps, as long as the insurer is sound and the muni is only a little less sound. Warren Buffett apparently doesn’t see anything wrong with this either.

Ok lets make it simple – muni gets lower cost of funding, buffet gets a risk freee premium and the bond buyer gets a lower yield. great for everyone but the investor and comncerned citizen, as that subsidy is facilitiating the destruction of your capital in the form of future taxes (borrowing). I’ll skip the discussion of the treasury market, but you get the drift

]]> By: Anonymous http://www.nakedcapitalism.com/2008/02/mbia-rating-agency-is-not-amused.html#comment-3620 Anonymous Fri, 01 Feb 2008 20:13:00 +0000 http://www.nakedcapitalism.com/2008/02/mbia-the-rating-agency-is-not-amused/#comment-3620 How to lose $7.2bn with just a few Basic skills<br/>SocGen: it could've happened anywhere - and still might<br/><br/>http://www.theregister.co.uk/2008/01/31/kerviel/ How to lose $7.2bn with just a few Basic skills
SocGen: it could’ve happened anywhere – and still might

http://www.theregister.co.uk/2008/01/31/kerviel/

]]> By: Greg http://www.nakedcapitalism.com/2008/02/mbia-rating-agency-is-not-amused.html#comment-3617 Greg Fri, 01 Feb 2008 18:13:00 +0000 http://www.nakedcapitalism.com/2008/02/mbia-the-rating-agency-is-not-amused/#comment-3617 YS, this was like a football coach calling for the hail-marry play<br/>with time about to expire. The stock rallies on an implicit<br/>admission that the game is almost over, amazing<br/>hallucinatory powers of the buyers.<br/><br/>Maybe you can have drinks with your banking insider this weekend, and give us an update Monday? YS, this was like a football coach calling for the hail-marry play
with time about to expire. The stock rallies on an implicit
admission that the game is almost over, amazing
hallucinatory powers of the buyers.

Maybe you can have drinks with your banking insider this weekend, and give us an update Monday?

]]> By: newsman http://www.nakedcapitalism.com/2008/02/mbia-rating-agency-is-not-amused.html#comment-3615 newsman Fri, 01 Feb 2008 18:09:00 +0000 http://www.nakedcapitalism.com/2008/02/mbia-the-rating-agency-is-not-amused/#comment-3615 <i>If a hurricane hits and destroys my investment properties doesn't it make sense for me to bail out my insurance provider?</i><br/><br/>Actually it just might make sense, if that same insurer has written the policies on billions of other investment properties outside the hurricane zone, and his collapse would mean banks calling in all my loans. I think that is why it might (note I said might) make sense for the banks to keep MBIA and its ilk afloat today.<br/><br/>I also don't see what's so wrong about munis shelling out an insurance premium to lower their borrowing costs a few bps, as long as the insurer is sound and the muni is only a little less sound. Warren Buffett apparently doesn't see anything wrong with this either. If a hurricane hits and destroys my investment properties doesn’t it make sense for me to bail out my insurance provider?

Actually it just might make sense, if that same insurer has written the policies on billions of other investment properties outside the hurricane zone, and his collapse would mean banks calling in all my loans. I think that is why it might (note I said might) make sense for the banks to keep MBIA and its ilk afloat today.

I also don’t see what’s so wrong about munis shelling out an insurance premium to lower their borrowing costs a few bps, as long as the insurer is sound and the muni is only a little less sound. Warren Buffett apparently doesn’t see anything wrong with this either.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/02/mbia-rating-agency-is-not-amused.html#comment-3612 Anonymous Fri, 01 Feb 2008 17:04:00 +0000 http://www.nakedcapitalism.com/2008/02/mbia-the-rating-agency-is-not-amused/#comment-3612 They are banking on future cash flow to save them as they ignore the reality of the present value and thus the reality that there will not be future cash flow! <br/> Great illusions depend on not asking questions or seeing the trick up close too many times. They are banking on future cash flow to save them as they ignore the reality of the present value and thus the reality that there will not be future cash flow!
Great illusions depend on not asking questions or seeing the trick up close too many times.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/02/mbia-rating-agency-is-not-amused.html#comment-3611 Anonymous Fri, 01 Feb 2008 16:32:00 +0000 http://www.nakedcapitalism.com/2008/02/mbia-the-rating-agency-is-not-amused/#comment-3611 Is the actual risk in 'cash' being overlooked?<br/><br/>Mike over at HedgeFolios had an interesting perspective on risk in 'cash and cash equivalents'. <a HREF="http://www.hedgefolios.com/read/auction-rate-securities" REL="nofollow">Auction Rate Securities</a> followed up on an earlier post, <a HREF="http://www.hedgefolios.com/read/cash-and-cash-equivalents" REL="nofollow">Cash and Cash Equivalents</a> where he talks about commercial paper, and the inclusion of corporate debt and asset backed securities in 'cash.' After what happened with Bristol Myers, makes me wonder just how hidden the problems are. Is the actual risk in ‘cash’ being overlooked?

Mike over at HedgeFolios had an interesting perspective on risk in ‘cash and cash equivalents’. Auction Rate Securities followed up on an earlier post, Cash and Cash Equivalents where he talks about commercial paper, and the inclusion of corporate debt and asset backed securities in ‘cash.’ After what happened with Bristol Myers, makes me wonder just how hidden the problems are.

]]> By: s http://www.nakedcapitalism.com/2008/02/mbia-rating-agency-is-not-amused.html#comment-3608 s Fri, 01 Feb 2008 14:30:00 +0000 http://www.nakedcapitalism.com/2008/02/mbia-the-rating-agency-is-not-amused/#comment-3608 After listening to all four hours of the call, one is no better off in feeling their way through the darkness. One has to belive that Ackman hgets the benefit of the doubt as it is he who has driven the forced disclosure that now seems to be coming grudgingly. If all was so great and in order, then MBI would have been out front of this long ago. MBI is desperate to protect the municipal business which is basically a risk free business, which begs the question of why it is necessary, other than as an inside subsidy for the municipalities. This whole NY charde is all about protecting the biorrowing costs of munis that are feeling the pressure from declining revenue and overstreched budgets. The more you watch the more disallusioned you become. After listening to all four hours of the call, one is no better off in feeling their way through the darkness. One has to belive that Ackman hgets the benefit of the doubt as it is he who has driven the forced disclosure that now seems to be coming grudgingly. If all was so great and in order, then MBI would have been out front of this long ago. MBI is desperate to protect the municipal business which is basically a risk free business, which begs the question of why it is necessary, other than as an inside subsidy for the municipalities. This whole NY charde is all about protecting the biorrowing costs of munis that are feeling the pressure from declining revenue and overstreched budgets. The more you watch the more disallusioned you become.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/02/mbia-rating-agency-is-not-amused.html#comment-3607 Anonymous Fri, 01 Feb 2008 14:18:00 +0000 http://www.nakedcapitalism.com/2008/02/mbia-the-rating-agency-is-not-amused/#comment-3607 The only thing a bail out achieves is that it continues the charade longer.<br/><br/>It is absurd for a private entity to even consider it.<br/><br/>If a hurricane hits and destroys my investment properties doesn't it make sense for me to bail out my insurance provider? The only thing a bail out achieves is that it continues the charade longer.

It is absurd for a private entity to even consider it.

If a hurricane hits and destroys my investment properties doesn’t it make sense for me to bail out my insurance provider?

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