The Unusual Suspects in an Ambac Bailout

It's like something out of a movie: a bunch of misfits with nothing much in common are thrown together in an attempt to pull off a massive heist - or acquisition of a monoline insurance company, at least.

According to CNBC, a consortium of banks including RBS, Wachovia, Barclays, UBS, Societe Generale (!), BNP Paribas, Dresdner, and Citigroup is putting together a bailout bid for Ambac (ABK).

Just the nationalities involved are mind-boggling: Scotland, US, England, Switzerland, France, Germany. And while some of the banks are large commercial banks with enormous balance sheets, others are much leaner and much more capital constrained. One has to ask what on earth Citi is doing on the list, given the size of Ambac's contingent liabilities: it should be shoring up its capital base right now, not acquiring a potential black hole.

All of the banks are big lenders: there are no pure investment banks on the list, although CNBC reports that the whole scheme is the brainchild of Greenhill & Co. The group of lenders wouldn't look at all peculiar if they were underwriting a big syndicated-loan deal, but this isn't debt, this is equity: it smells much more like the bailout of LTCM, which only came about after the New York Fed banged a lot of heads together.

Who's playing the heavy in this situation? Surely not New York State's Eric Dinallo, he doesn't have that kind of moral suasion. Could enlightened self-interest really be enough to bring all these banks together? Or is there some other shadowy force which managed to get representatives from all these different banks in the same room at the same time?

Comments

[fartindawind]

I think the whole thing was arranged by Heath Ledger, with Enron and WorldCom as subadvisors

[helplessobserver]

I think it is the invisible hand of the market pointing to financial collapse.

[GregY]

No. It is Bush. Everybody knows that everything, from Global Warming to .... (you feel the blanks), is his fault.

[fartindawind]

I have a better idea. Why not have MBI do a LBO using hedge fund assets as collateral?

[fartindawind]

Then, the junk securities could be AAA rated, if FGIC structured them as a CDO.

[whatadifadaymakes]

I believe the only person qualified to figure out this mess is....................... Milken............Where is he these days

[suspicious]

Note the timing of the news. Caught all the DOW shorts red-handed in the last hours of the week. More Wall Street hyjinks. This story is just beginning.