Dinallo Comes Down on Monoline Bears

It sounds like Eric Dinallo, the head New York State Insurance regulator, has pretty much had it with Bill Ackman and his pals:

 

Rumours that can destroy the stock price of banks and investment banks have been the focus of the media and have now attracted the attention of regulators. But what about rumours that cast doubt on the solvency of insurance companies that are equally important to the New York economy and global capital markets? All financial services companies – banks, investment banks and insurance companies – rely on market confidence. . . .

This is why New York State enacted a law in the 1930’s providing for civil and criminal sanctions for spreading false rumours or making statements “untrue in fact” about an insurance company’s solvency. . . .

Recently, some individuals have asserted that some of the bond insurers are insolvent – a far more serious, far reaching and risky allegation than claims that the insurer’s holding company stock is overvalued. Publicly questioning the solvency of these companies is of a completely different order. . . . [Emph. added]

You don’t need to spend much time on The Googles to confirm that insolvency is precisely what Ackman has been predicting for the guarantors, most recently on June 18. I won’t rehash the whole guarantor debate here, but will only note that neither the rating agencies nor Dinallo dispute the fact that most companies have ample claims-paying ability under even a very severe mortgage-loss scenario. The main reason that so many people seem to believe the industry is insolvent is that Bill Ackman and his ilk have been beating the drum on the issue for so long. Good for Dinallo for bringing the hammer down on them.

Tom Brown is head of Bankstocks.com

Comments

[discov:]

You say "The main reason that so many people seem to believe the industry is insolvent is that Bill Ackman and his ilk have been beating the drum on the issue for so long."

yeah, that's right bill ackman and his ilk are god almighty and have the power to control capital markets (entire sectors at a time).

You just released this article, maybe you still have time to get it retracted before it gets you shamed.

2008 Aug 03 03:02 AM

[1worldcurrency:]

Big Brother will not allow this questioning of our institutions. Tom Brown why do never post any real analysis? How about some numbers to prove the market wrong about the monolines? How much capital do they have and how is it valued?

2008 Aug 03 03:24 AM

[Alan von Al...:]

"You don’t need to spend much time on The Googles to confirm that insolvency is precisely what Ackman has been predicting..."

Okay, I give up. What are The Googles?

2008 Aug 03 05:45 AM

[venividivici:]

Tom Brown you are perhaps the most pathetic cheerleader for these totally discredited people and the organisations they run and that is truly saying something. Congratuations old boy and keep on pumping.
But I'm sure I don't need to tell you that.

2008 Aug 03 09:23 AM

[Paula Rush:]

I agree with all the previous posts, I continue to be amazed at the arrogance and stupidity of Tom Brown. He and Bush should put the cheerleader uniforms on together, that's about all they are good for.
The fact that TB represents BankStocks.com says it all. No one is telling the truth in the industry or our government about whether or not banks and insurers are insolvant, with the "spin" that the rumors would take the companies down. So let's not speak the truth and warn the good honest people, let's protect all the criminals who caused this to happen right to the bitter end. Do you think any of them will be left with uninsured deposits or holding worthess stocks? I quess not. For that matter they won't even be holding US dollars. They just need more time before the truth comes out to move all thier wealth elsewhere. This writer should stick with facts and not his fantasy land worthless observations.

2008 Aug 03 10:13 AM

[wpdragon:]

Fact of the matter is, nearly all of the "rumors" about the health of the financials have proven to be true, and often things are worse than even the rumors suggest. So, we have an administration, a political party, and a bunch of regulators all in bed with the financials and the hedge funds they spawned to do their dirty work away from the eyes of the regulators, and an election coming up... easily the most important election of a generation.. can you say manipulation???

2008 Aug 03 11:47 AM

[Bonanza36:]

But it is certainly acceptable for numerous CEO's to go on TV and publicly prounounce that the crisis is over, there is no need to raise additional capital, then a week later to a secondary with a 40% dilution?

How stupid do you/they think we are?

That, along with the shills (Brown included) for the BK financials should be investigated by the SEC.

Brown, I have gone back and read all your bullish headlines for the last year on this. God help your investors if they are following your advice.

The banks are continuing to play "hide the sausage", now with the approval of FASB for another year.

Being in the mortgage capital markets, I can tell you this is far from over. There are more sellers of mortgages than buyers, with this week Chase eliminating Jumbo loans from their TPO channel with the explanation that there is no market for them at this time.

Tom, other than seeing your name in print, what motivates you to continue to publish your rubbish on SA?

2008 Aug 03 01:01 PM

[PlentyOStocks:]

The other investigation underway is the Connecticut AG looking in S&P and Moodys rating criteria and Moodys relationship to Berkshire Hathaway. I would think Buffett is above reproach, but I would not be surprised if some Moodys people engaged in monkey business so they would look good to their largest shareholder.

2008 Aug 03 01:34 PM

[PlentyOStocks:]

The facts actually do support Tom's thinking. Look at the latest deal.
Ambac has written contracts down booking losses of $1.4 Billion. These are the same reserves the Ackman and the bears say are way to low. Even some posters above say the losses are worse than disclosed.
However, Ambac just settled those $1.4 Billion in "inadequate" reserves for $850 million. That is only 60% of what they booked as losses. They were also the worst of the worst contracts.
If Ambac settles the rest of their CDO exposure they will end up booking $Billions in gains and end up with a clean Muni Bond insurer.
The facts do not look like an insolvent insurance company to me.

Ambac is also still paying a common dividend. Why does the regulators not block this if Ambac is insolvent. Well...simply they are not...

2008 Aug 03 01:41 PM

[CLH:]

Tom---very good post.

2008 Aug 03 03:09 PM

[neeb??:]

A question. How can any banker come up with any book now and not be accused of some bookcooking? What with all these shills, criminal fraud types, hookers, cookers and associated whatevers, can ANYONE in these sectors be trusted?

2008 Aug 03 07:12 PM

[bearfund:]

neeb??: Rhetorical question, of course. But it does well to highlight the fact that most of these companies' problems are of their own making. Too many lies, too many optimistic statements that rapidly proved false, too little transparency. There are very few companies in this industry that deserve any shareholder trust whatsoever. Most of them deserve to trade at 40% of book, little more than speculative plays on a hypothetical recovery that may well never come.

2008 Aug 03 09:04 PM

[1worldcurrency:]

Plenty you believe some regulator will come in and stop AMBAC from paying a dividend? I'm still laughing.

2008 Aug 03 10:54 PM

[Draconian:]

I think Dinallo should launch an investigation into bloggers who create accounts to cheer lead their own posts.

2008 Aug 03 11:20 PM

[DonaldRay:]

you are absolutely correct, people should be held accountable for thier slanders, gossips, and market manipulations. Ackerman may not be able too control the entire market but he certaintly controls Lehman stocks through all the above mention.

2008 Aug 04 02:37 AM

[PlentyOStocks:]

Regulators seized one of the bond insurers to protect the capital. You really think that Ambac's management would lose their jobs and wipe out their stock and option grants over a penny dividend if regulators objected to it?

You guys are actually funny. You offer no substantive information to support your points against Tom Brown's opinion; just a lot of put downs and insults. Are you teenage bloggers?

2008 Aug 04 09:49 PM