Spitzer: The Monoline Angle

Now that Eliot Spitzer has resigned, whither the monoline insurers? Gari does some analysis:

It's interesting to note that when Spitzer was dallying with courtesans at the Mayflower hotel in DC, he was in town to testify about bond insurance. Spitzer's attempt to refloat the bond insurers can be viewed as one of several attempts to make nice with the financial services industry. A couple of short-sellers aside, most of Wall Street has an interest in keeping the monolines, a reliable conduit to the pockets of retail investors, open for business.
It's not as if Spitzer's departure is likely to end efforts to rescue the bond insurers, and it could be that the role of New York state's government in the effort has already been superceded. But while the Spitzer/Dinallo wrangling was designed to deal with continuing issuer access to market rather than protect investors, stabilising the market is an area where the interests of the two coincide.
Leadership of the effort is already shifting, in particular to California. But California has an almost innate distrust of the financial services industry. Any investment banks that are currently cheering the downfall of their nemesis should remember that moment when Bill Lockyer manages to get their monolines dismembered.

I think this does a mild disservice to Eric Dinallo, who's more than capable of taking the lead on these matters himself, especially if he has a relatively complaisant boss. But I do think it's unlikely that a Paterson-run New York will be as forthright on the monoline front as Spitzer's New York was. And that might not be good news for MBIA, Ambac, and the rest.

Comments

[Kurtis]

Why should the monolines be kept in business? MBI and Ambac are debt ridden hulks. Now that Moody's is rating munis the same as corporate debt they've become useless relics. They have no business. Munis will get their Aaa rating without the need for monolines. There're dinosaurs without a purpose. They're stocks will collectivelly sink to pennyland which is where they belong. Again I say BUYER BEWARE!

[mar del plata-buenosaires]

These stocks are already down 80-90%. I cannot figure out why anyone including Tillson and Middleton continue to talk trash about these companies, as they hang on to the coatails of Ackman. What good comes from burying these companies? More unemployed people? Are any of you guys American, or just posing? Can anyone find some foreign companies to short... Short some foreign stocks for a change. Change your flavor. Leave ABK and MBI alone, write about solutions. Stop manipulating the little bits and pieces that are offered up. Let the stocks run their natural course, and then you can say you were right or wrong with a little dignity. For the record I am long MBI and ABK, and a dozen other stocks in my portfolio. I buy whenever I can to do my part in supporting our economy. Hey short sellers, I hope all of you don't get caught with your shorts up...Cover them while you can, and start helping our economy!

[crashof2008]

Could you please inform the class how it is beneficial for new business growth of MBIA that New York, California and New Jersey announced last week that they will not be using bond insurance on their new municipal bond issues?

How is that good for business?

If MBIA is such a AAA stock, why are they forced to pay 15% on their newly issued debt? Isn't that the rate firms with terrible prospects are required to pay?

Or do you know far more than those who would lend money to MBIA in the capital markets?

Have you taken the time to read the 10K and the 10Q that MBIA recently filed with the SEC? You would serve yourself well to read both and attempt to understand them.

These are what MBIA is saying about their prospects, not me!

Why don't you read (and try to understand) what they are saying to the Feds (in the forms of their recent 10K and 10Q) under penalty of perjury?

My, my.

Oh well. Best of luck to you. Be sure to check back in a year!

Matt