A dirty little secret of the bond insurer mess is that the rating agencies not only aided and abetted their ill-fated entry into the structured finance business but apparently prodded them in that direction. Although I had been given this tidbit before, I hadn’t gotten independent verification, but it now comes via a report in […]
Read more...Treasury Secretary Hank Paulson has thrown a bucket of cold water on a number of proposals being floated in Washington to rescue troubled borrowers via the explicit use of public funds, such as the idea of reviving the 1933 Home Owner’s Loan Corporation to buy underwater mortgages and renegotiate them. In some respects, Paulson’s tough […]
Read more...DealBreaker does some serious reporting today, informing us that some traders have told them that the failed auction rate securities market was always dependent on stabilization by dealers. For anyone who has worked in the securities industry, the term “stabilization” pregnant with regulatory significance. Stabilization, as defined by the SEC, is …transactions for the purpose […]
Read more...Bloomberg tells us that the credit default swaps market does not see MBIA as anything remotely resembling an AAA: Moody’s Investors Service and Standard & Poor’s say MBIA Inc. has enough capital to withstand losses and justify its AAA rating. MBIA’s debt investors aren’t so convinced. Credit-default swaps indicating the risk that Armonk, New York-based […]
Read more...Martin Wolf, in “Why Washington’s rescue cannot end crisis story,” tells us, push come to shove, the government can bail us out of our economic mess, but it would be unwise to stop there. Wolf argues that substantial steps need to be taken to rein in a financial sector that is beyond the understanding of […]
Read more...A group of hospitals which has issued auction rate securities and are now choking on the “failed auction” rates have petitioned the SEC to allow them to buy back the debt. The notion is that they’d either hold the debt off the market until conditions normalize, or would retire it completely, replacing it with longer […]
Read more...Despite the sudden flurry of worry in the press, triggered by the release of Citigroup’s 10K, VIEs, or variable interest entities, have been around for some time. They were a favorite device of Enron’s. SIVs are a subset of VIEs. With such an illustrious history. it’s a wonder they haven’t gotten more inquiring coverage until […]
Read more...This development takes the bond insurers out of the headlights for now, although Moody’s still rates MBIA as having a negative outlook. Credit default swaps on the monoline have fallen 240 basis points to 615, according to Bloomberg. Note also that the rating agency is cool on the idea of a split. From Reuters: Moody’s […]
Read more...To paraphrase the late Senator Everett Dirksen, a handout here, a handout there, and pretty soon it adds up to real money. The latest supplicants looking for alms from the Federal purse are state governors on behalf of local governments hit by the auction rate securities debacle. So far, they have not developed a proposal. […]
Read more...A bit late to this item, which appeared on Bloomberg. Remarkaby, their headline does not mention the most newsworthy item, which is the possible recanting of the preliminary earnings announcement. At a minimum, this would seem to raise questiona about the quality of controls. The decision to stop writing asset-backed securities guarantees for six months […]
Read more...Some of the cloud over MBIA was removed today as Standard and Poor’s affirmed its AAA. However, the number one bond insurer still has a negative outlook. The AAA for Ambac was also affirmed based on its capital raising plan and likelihood of being able to implement that plan. However, it remains on review for […]
Read more...The market is wiling to treat thin gruel as nourishment. We saw an impressive 250 point rally in the Dow on Friday and an over 400 point gain in the Nikkei based on the improving odds of a rescue of troubled number two bond guarantor Ambac. But what is this salvage operation, exactly? The Wall […]
Read more...First, let’s start with a general premise: if a borrower has a reasonable ability to service his mortgage (and “reasonable” is in the eye of the beholder, but one has to assume it better be north of 50% of a “fair” rate) it’s better to renegotiate and keep him in place. Now that we have […]
Read more...The markets seem to think so…..From Doug Noland at Prudent Bear: Now Fannie is in theory a good credit, but its implicit Federal guarantee has never been tested. Market observers may be worried that many of the “rescue the homeowner” proposals, starting with what Tanta calls “Loans Formerly Known as Jumbos” now eligible for the […]
Read more...Steve Waldman at Interfluidity reminds us that bailouts can be useful or misguided, depending on the circumstances. Trying to shore up overvalued assets is simply a bad idea and often compounds the damage. Unfortunately, as we will discuss in this post, the use of Waldman’s criteria demonstrates that many of the proposed housing market rescue […]
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