Ambac Collapse: Anticlimax of the Week

In what would have been major news nearly any other week this year, MarketWatch is reporting Ambac warns downgrade would put unit under pressure:

Ambac Financial said late Friday that a downgrade by ratings agency Moody's Investors Service would leave its guaranteed investment contract business short of collateral to meet liabilities. ...

Moody's warned late Thursday that it may downgrade the main bond insurance units of Ambac (ABK) again because losses on mortgage-related securities they guaranteed are likely to get much worse. Ambac shares slumped 42% on Friday after the warning, while MBIA stock fell 8%. Ambac shares fell another 7% to $3.60 during after-hours trading.

Ambac said late Friday that a downgrade would increase pressure on its financial services business, which includes guaranteed investment contracts, or GICs. GICs provide institutions a certain rate of return on specific amounts of money. Providers promise to pay an agreed rate and get the money to invest in return. Profits are made on the spread between the rate the provider offers the buyer and the returns it can generate itself.

Municipalities often use GICs when they get large sums of money from a recent bond offering, but don't want to spend the cash straight away. Ambac and MBIA have large GIC businesses.

When GIC providers are downgraded by ratings agencies, they are often required to post more collateral to support the agreements, or come up with collateral when the contracts are terminated.

Ambac estimated late Friday that if it's downgraded there won't be enough assets in its GIC portfolio to cover the projected cumulative collateral requirement and terminations.

Ambac "Mystified" By Moody's Announcement

Inquiring minds are considering Ambac's press release on the ratings action by Moody's.

We can find no justification for Moody's actions based on our ongoing analysis of Ambac's portfolio, our aggressive remediation efforts and progress toward commuting exposures with certain counterparties.

As you know, after Moody's released its decision with respect to Ambac, the United States government announced its intention to establish the Mortgage and Financial Institutions Trust that will be authorized to acquire up to $750 billion of impaired assets from various financial institutions. While the details of this act are not yet known we believe that an undertaking of this magnitude may change the financial landscape entirely.

Moody's updated mortgage loss assumptions are extreme in our view and appear to be based on limited additional data since their last review. We continue to be mystified by Moody's methodology of applying additional stresses to the current incredibly stressed environment.

Upon a downgrade below the current rating level, Ambac estimates that the GIC asset portfolio is insufficient to cover the projected cumulative collateral requirement and terminations.



Another important consequence of a potential downgrade is a re-evaluation of the plans and the timeline for our Connie Lee effort. Despite Moody's action, we believe that our Connie Lee initiative is still viable and, in fact, needed more than ever. We had hoped to launch this new financial guarantee subsidiary focused on the municipal sector in the fourth quarter and have been working tirelessly to do so. However, the recent market turmoil and Moody’s action cause us to decelerate our timeline so as to focus our resources on addressing the concerns raised by Moody’s.

Smoke and Mirrors at Ambac

Ambac has a market cap of $1.1 billion. The above table shows that even a tiny one step downgrade means that Ambac would need to raise capital nearly 100% of its market cap. A two or more step downgrade shows that Ambac would need to raise nearly 200% of its market cap.

Ambac is essentially arguing "don't downgrade us because it will wreck our business". To that I say, any company whose business model depends on maintaining a certain debt rating has a fatally flawed business model to begin with. Furthermore, it just might behoove companies operating with such a flawed business model to not get into trouble in the first place. Ambac (ABK) and MBIA (MBI) fail on both counts, and it was greed and excessive risk taking that did them in.

That Moody's is prepared to downgrade Ambac means one of two things: 1) Ambac is no longer relevant or 2) something else is at work, such as yet another bailout at taxpayer expense is coming.

Ambac's share price collapsed on a day when every other financial stock was flying. That collapse serves as a fitting anticlimax for the week.

Comments

[Ishortyou:]

AMBAC and MBIA are very well known for their liabilities, I would probably delever as soon as possible of those insured JUNK or NINJA backed assets, it is already known that the government bail out consist on having the banks putting this junk on fire sale at approx 30 cents of a dollar that means that there would be about 70 cents of a dollar reported lost, this 70 percent is probably going to be covered by some kind of goverment loan at certain interest rate, that means AMBAC and MBIA will need to post that amount as collateral unless of course they are or being delevering from those insured JUNK. Sad but Moody's rated those JUNKS as triple A rated and now come with this nonsense, I wonder where the regulators are? and what are they doing about Moody's erratic behaviour?

2008 Sep 21 12:23 PM

[fatcat:]

Ishort,I have the same questions...70% losses on these markdowns...it just gets worse...

2008 Sep 21 12:31 PM

[Tom Armistead:]

The assets supporting Ambac's investment agreement business are currently trading at artificially depressed prices. Most are perfoming. Given time, they will recover to meet their liabilities. So this is a liquidity issue, not a solvency issue.

Ambac had adequate collateral posting capacity. The precipitating incident was the rapid failure of Lehman, which was a CDS party to some of the investment agreement transactions. LEH enjoyed a A1 rating from this self-same Moody's. This will lead to unexpected collateral calls. It's an instance of a new phenomenon, discovered by George Bush, called inter-connectedness.

I have hopes George will also discover another phenomenon, which is the need for SEC regulation of manipulators.

Ambac's market capitalization is not the issue: it's their claim paying resources, 16 billion at the end of the 2nd quarter. Ambac has other ways to come up with the collateral, if required, beyond a share offering. We'll see what happens.

Michael, your comments about the business model are clueless. The whole point was about being rated triple A: unfortunately, that relied on the rating agencies, not exactly a reliable set of business partners. The primary business model of MBIA and Ambac has functioned as intended because they are not required to post collateral on the market's inflated estimates of their insurance losses.

In point of fact Ambac had approximately 3 billion of capial beyond Moody's previous requirements. If Moody's keeps moving the goal posts, they will make themselves irrelevant.

2008 Sep 21 12:57 PM

[bold4gold:]

When will this collapsing end? Got Gold???

2008 Sep 21 01:53 PM

[StankyPigano:]

Nice Post Tom.
Regarding the Rating Agencies, Paul Kedrosky wrote an excellent article Friday examining the role of the Credit Rating Agencies in the negative feedback loop which is perpetuating this crisis. In contrast to short sellers who sounded an early alarm and arguably kept valuations from going higher than they did, Moody's and S&P first perpetuated the explosion of debt and are now exacerbating the subsequent implosion.
These companies SHOULD be irrelevant, but their relevance is mandated under Federal Securities Law.
In fact if the markets are so precarious that we must ban short selling, then we should likewise suspend the Rating Agencies' ability to downgrade until they can be legislated out of existence.

2008 Sep 21 02:09 PM

[corellian98:]

Flawed reporting >> United States government announced its intention to establish the Mortgage and Financial Institutions Trust first...then Moodys advised on the possible downgrade.

Question>> You say, "To that I say, any company whose business model depends on maintaining a certain debt rating has a fatally flawed business model to begin with.

I would like to point out that a good part of the worlds companies work on this model. Go back to school. Are you telling me GE and Warren Buffet have flawed models???????????

2008 Sep 21 02:12 PM

[daveddawg:]

The simple solution would be for the SEC to prevent any ratings agency from issuing a downgrade on any of 800 financial stocks until at least 2 Oct. Upgrades OK. Maybe they should extend it further if needed.

2008 Sep 21 03:23 PM

[Ishortyou:]

I agree with Tom, the rating agencies should be irrelevant and should be suspended from rating untill the market stabilizes, the rating of the insurers should be dictated by the market itself and by other models because the current one obviously is not working well. The reckless prior downgrade of AMBAC and MBIA already had triggered massive sell off of municipal securities freezing the muni market to the point that lead to the auction rate securities crisis, massive write down of banks and brokers and bankruptcies, one more notch will cause certainly a lot of problems in addtition to the exisiting ones and that is not going to be pretty.

2008 Sep 21 03:27 PM

[glassbox:]

Moody's and S&P's business model is premised on the fact that the market will buy and believe their ratings. What they have done in the last one year is basically to negate the trust that the market has with them - firstly by overrating what was not worse credit and then at the bottom of the crisis, to keep moving the goal post downwards.

With the current state of affairs, the problem is not with collateral posting, the problem is 'who can you trust'? At the end of the day, what is called to question is the integrity of the management running the companies and the integrity of the market system allocating the capital. I must say at this point, the latter is sorely lacking.

Ask most of the management of the companies (other than the wall street investment banks which I have a different issue with) - I think they are working harder than anyone to restore any semblance of stability and trust in their operations. Yes, perhaps some of the mistakes were their undoing but I think the fact remains that they were operating under an environment that have certain assumptions which are now being severely challenged. The job of regulators is to ensure that systemic risks like what we are seeing now do not go out of hand and creates a self fulfilling prophecy of downward spiral to be taken advantage of - sadly, all that neglect of this objective is now coming undone.

Come on, stop putting the sole blame on management for what on hindsight looks like a flawed business model. Going by the number of requests of companies who were not included in the SHO list requesting to be put on it just shows that there is something very flawed with the system in which the market operates, perhaps more so than the business model the company is operating with.

ABK collapse is really one worst case depiction of the failure of the system - at this point, can one really say they 'trust' Moody's downgrade?? I am actually more prepared to trust the management as they have demonstrated positively trying to recover my money. I don't have the answers cause the whole thing baffles me. I certainly hope that the market is capable of coming to its senses and logic in the midst of all that fear, mistrust and uncertainty.

2008 Sep 21 03:43 PM

[SaudiMail:]

The recent hijacking of ABK by Moody's and unknown third parties,
however, violates the integrity of the art of trading equities, and I
feel the need to voice my concerns.

There is a story in a stock's movement that often tells who is doing
what, and, in retrospect, for what reasons. In the four months I have
been trading bond insurers, I have developed an understanding of how
institutional traders enter, exit, and manipulate various insurers. It
is this experience, combined with a review of MBI's trading patterns
between the hours of 9:30 and 11:30 am that leads me to believe that
ABK is being manipulated. For what reasons I don't know, but when
upwards of $300,000,000 is being so carefully moved through Ambac's
market, an alarm should be sounded in every trader's mind.

As you all know, (or should know), Short-selling of ABK's shares has
been temporarily banned. Yet, the steady downward movement of trading
in Ambac reflects not the free-fall of MBI between 9 and 11 am, but
the contrived downward pressure that is reminiscent of one of the many
bear raids - scars of which I bare - that has comprised Ambac's
trading activity since July. Traders are effectively selling Ambac
short through the exercise of options puts that allow them to
simultaneously buy and sell shares at progressively lower prices,
without the obligation of having to buy them back. There are problems,
however, with the theory that Moody's et. al. have in mind a goal of
destroying ABK through the depletion of shareholder value.

Unlike Lehman Brothers, Ambac cannot be forced into insolvency by the
ruthless destruction of its market cap. This is a company that has
seen the value of its shares plummet to $1.04; if bankruptcy was to be
declared, it would have happened then. Rather, Ambac can only be
materially effected by the lowering of its ratings, which would
require it to post capital to cover additional obligations. Whether
Moody's is saber-rattling or not, I cannot tell, and for that matter,
don't believe anyone else can either, but in all probability, the Fed,
Congress, and the Treasury will likely push through legislation soon
allowing the government to effectively sanitize the balance sheets of
banks. For Moody's to threaten a ratings downgrade under such dubious
reasons as the possible further deterioration of its mortgage
portfolio sounds shaky given recent developments, But I don't know.
Maybe Moody's knows something I don't.

2008 Sep 21 04:12 PM

[SaudiMail:]

May 1 (Bloomberg) -- Billionaire Warren Buffett's Berkshire Hathaway Inc. faces a probe by Connecticut's attorney general for possible conflicts created by owning almost 20 percent of credit ratings company Moody's Corp. while also running a new municipal bond insurer.

Connecticut is investigating the ``clear and direct conflict of interest for Moody's to rate a company owned by such a significant Moody's shareholder,'' Attorney General Richard Blumenthal said in an interview.

Moody's gave its top rating last week to Berkshire Hathaway Assurance Corp., created in December as existing bond insurers struggled to maintain their AAA ratings. A favorable rating for Berkshire by New York-based Moody's, or a lower rating for competitors including MBIA Inc. and Ambac Financial Group Inc., may give Buffett's company an advantage.

2008 Sep 21 04:19 PM

[Old Coach:]

The only question that matters now is how the new bailout will impact ABK and MBI. If the government is going to buy up all of the toxic paper, does that take the insurers off the hook? If their off the hook, how could they be downgraded? It would seem an upgrade would be logical.

2008 Sep 21 04:20 PM

[Owen:]

Michael,

You claim that "any company whose business model depends on maintaining a certain debt rating has a fatally flawed business model to begin with." But tell me, would you buy life insurance from a company you suspect might not outlive you?

Every insurance company on earth depends on its credit rating for survival. No insurer can possibly cover a worst-case scenario in which all claims arrive at once. The days when an insurer's assets could have covered all possible underwritten claims have ended about 300 years ago.

2008 Sep 21 04:30 PM

[SaudiMail:]

The rating agencies were responsible for the original AAA ratings of the loans, CDO's and bonds purchased by financial institutions. This junk was purchased and premiums charged on the basis of these ratings. Therefore, when the ratings turn out to be flawed, it is the likes of Moody's who should be compensating the institutions who bought them on the basis of their 'expert opinion'.
These same agencies who sold junk in the guise of AAA packages then have the cheek to downgrade the institutions who were foolish enough to trust the rating agencies.
The rating agencies are a major cause of the current financial problems, they should be suspended and have their assets seized until the outcome of a full federal investigation has been concluded.

2008 Sep 21 04:37 PM

[James Shaw:]

I totally agree that the ratings should be suspended for the time being.

I also question on the timings of the possible downgrade bu Moody's.

ABK stock is heavily shorted. The news that the government will ban shorting selling for the time being resulted in the big rally on ABK.

ABK stock is clearly manipulated.

2008 Sep 21 05:56 PM

[Andrew Oliver:]

Email to Moodys I sent todayabout ABK/MBI rating review. If you agree circulate this and try to put public pressure on Moodys.

"Clearly, regardless of whether Moodys or the companies were correct last Thursday, the situation has changed with the announcement of the Federal Government's $700 billion plan to buy residential MBS from financial institutions.
The pertinent question now is this: had Moodys not made the announcement last Thursday, would it do so today and would it mention the possibility of a multi-notch downgrade?
If the answer is no, will Moodys withdraw the review?
If the answer remains yes, can Moodys explain why that is so?
The US - and hence global - financial system was severely in jeopardy last week, leading to the Government's announcement on Thursday, ironically just hours after the announcement by Moodys. The financial system now needs a period to recuperate. I am not, of course, suggesting that Moodys does something it feels is not justified, but in the new circumstances would it not be reasonable for Moodys to announce that it is suspending the downgrade review until such time as the results of the Government's plan are clearer?"

2008 Sep 21 06:15 PM

[bertil:]

It seems that nobody, here or on other sites that I've checked, are speaking warmly FOR or agreeing with and thanking all the Moody's men for doing such a good job...

2008 Sep 21 06:28 PM

[Tom Armistead:]

Maybe George Bush would tell them, "Heckuva job, Moody's."

2008 Sep 21 06:45 PM

[trendsrus:]

Mike,

You miss the big picture. IF what ABK insusre is worth less THEN the companies that hold such paper have big problems AND even bigger problems IF ABK goes down the tubes.

The "flawed business model" is self correcting as should be self-evident by the simple fact that Mood'ys raised the ratings they now may lower again. AND then we will see the companies that hold such paper make deals again effectively once again prompting Moody's to raise the ratings.

It should be self-evident that the only "flawed business model" is the one of Moody's who is an irrelevant bystander practicing voodoo rating and attempting to vicariously run the business' of others. Moody's is a day late and a dollar short and should be put out of business AS thier only a necessary evil -a leech imposed by Government that serve no purpose and add no value...

2008 Sep 21 07:09 PM

[Warren's Al...:]

I bought ABK last Friday since the Possible Downgrade will likely NOT occur for a few reasons:

1) The new bailout greatly reduces the likelihood of forced bank takeovers of underpreforming mortgages. Why force a homeowner out and sell the property to recoup your loan when you can sell tyhe mortgage to the new bailout fund (at a loss) much faster and easier.

2) The bailout gives ABK MBI RDN & PMI etc. a longer time window to either work things out or prevent (or cure) defaults. Instead of a few months I think they will have as much as 3 years before a payout happens;

3) Time is the friend of an insurance company since their investment portfolios generate steady Government bonds returns while the market stabilize.

4) More Government plans are coming such as allowing foreigners an Entry Visa if they come to the US and buy a property;

5) The short selling rules will almost certainly be extended through election day.

6) the government(rightly or wrongly) wants to blame short sellers and look for aggressive prosecution of those hedge funds and traders that break the short selling rules (K Fine on Fast Money said she would continue to short...watch for the FBI on her doorstep soon).

7) S&P is under pressure to review all pending downgrades in light of the new bailout restructurings and they don't want to be seen as pushing a company over the edge.. They are already in hot water on many downgrades based on nothing other than the stock price of the issuer...they have a lot of litigation coming their way...

8) Ambac has a lot of options and a large investment portofolio and are fighting back.

2008 Sep 21 08:22 PM

[eric2802000:]

It's a ploy by Buffet to gain market cap. It's as easy as that. And Michael, when you say, "... any company whose business model depends on maintaining a certain debt rating has a fatally flawed business model", tell that to Google when they rate your website and articles. Are they not a rating agency? If you want to go by that rationale then your business model is flawed as well.

2008 Sep 21 08:50 PM

[bigmateo:]

all you need to know. Moodys (20% owned by Warren Buffett) downgrades ABK and MBIA on Thurday. Thursday Buffett buddy Wilbur Ross agrees to buy 5 million shares of Assured Guaranty.

ABK down over 50%, AGO up over 35%. Not a bad return in one day Wilbur!!!

The SEC is too busy to notice.

2008 Sep 21 09:02 PM

[gph:]

Thanks for your comments Tom. What do you make of ABK saying,

"Upon a downgrade below the current rating level, Ambac estimates that the GIC asset portfolio is insufficient to cover the projected cumulative collateral requirement and terminations."

Why do you think ABK is not stating their claims paying abilities as you eloquently did?

Thanks again.

2008 Sep 21 10:29 PM

[verdo:]

WOW, this is a journalist. BANKS (stupid) insurance companies of all kind (stupid) all work on such a "flawed" model. Business models are based on expected variances within a calm and stable economy...NOT AN ECONOMIC MELTDOWN. I have never read anything so intellectually lazy in my life. Maybe that is why he is a "journalist" and not a real person.

2008 Sep 21 11:12 PM

[Old Coach:]

I've been reading anything I can find out there about the coming bailout. Two questions I can't answer yet. 1) If the government buys up all the bad debt, are ABK's obligations to those liabilities gone? 2) Any word on if they will revise the mark to market accounting rules?

2008 Sep 21 11:22 PM

[dapo45:]

Michael,

I don't think the business model of ABK or MBI is flawed. It is your understanding of their business model that is flawed.

2008 Sep 21 11:57 PM

[zermux:]

Please close the credit agencies down. Their financial ignorance killed LEH and almost killed AIG. If I was a conspiracy theorist I would question the ineptitude of these idiots and suggest that something more insidious was afoot. Placing sleepers, as analysts, into these agencies would be easy and very profitable. Dear Government, please remove the offical status of S&P, Moodys and Fitch - they are bereft of sanity.

2008 Sep 22 12:45 AM

[The Simple ...:]

Moodys is clearly going against the current objectives of the US Government, and the Securities Exchange Commission. Government is trying to improve financial institutions, and Moodys is trying to take them down. Shareholders for Moodys, ABK, and MBI are extremely upset with and threatening lawsuit against Moodys. Rightly so.

2008 Sep 22 01:14 AM

[The Simple ...:]

Sorry one more thing. I find it interesting that Moody's largest shareholder is Berkshire Hathaway. Berkshire Hathway owns BHAC. BHAC is a DIRECT competitor of MBIA and AMBAC. So how is Moodys allowed to rate ABK, when its parent company owns an ABK competitor (BHAC)??? That's complete conflict of interest in my book.

2008 Sep 22 01:17 AM

[John Muforza:]

Are you too big to fail? If so, pass the offering plate along with pleas to
stop the armageddon that today`s market and key players in their infinite
wisdom know will come if a "too big to fail company fails", to your favorite
uncle Sam and the check will be in the mail for all the billions you need
to keep your credit score decent, or should I say keep your business
afloat. If what all those tax cuts did, was to get more bail outs from
Uncle Sam as it seems lately, then somebody is being fleeced and
I bet it isn`t these "too big to fail crowd". For all the hell it is putting us
through, I say let`s give failing a chance.

2008 Sep 22 02:12 AM

[Tom Armistead:]

ABK would need the approval of the Wisconsin OCI to use insurance company funds as collateral for the investment agreement business. What is needed is time for the investment agreement assets to recover from panic level market values.


On Sep 21 10:29 PM gph wrote:

> Thanks for your comments Tom. What do you make of ABK saying, <br/>
>
> "Upon a downgrade below the current rating level, Ambac estimates
> that the GIC asset portfolio is insufficient to cover the projected
> cumulative collateral requirement and terminations."
>
> Why do you think ABK is not stating their claims paying abilities
> as you eloquently did?
>
> Thanks again.

2008 Sep 22 05:21 AM

[fxtrader07:]

Moody#s shut be shut down, as well as S&P. period. they did more harm than good and they continue to do so. their actions remind me by now of moronic daytraders flipping back anf forth - buying high, selling low, turning from bullish to bearish on a whim. same with Moody's upügrades - downgrades, most of them juyt in response to public pressure. Go figure. the sooner these ratings agencies cease to exist the betetr for everybody.

2008 Sep 22 05:56 AM

[stvcomment:]

Rating agencies, I recal, several years ago,l one life insurance company maintaining an excellent rating all the way up to their bankruptcy.

Rating agencies vs analysts ratings compare and contrast...discuss

2008 Sep 22 07:13 AM

[Ishortyou:]

Are you guys calling the regulators to report this abuse? I think the SEC is sleeping on this issue!!!!

2008 Sep 22 07:22 AM

[fxtrader07:]

as I see it, Moody#s willö be gone before all this is over. The helped to create this mess with their nonsensical AAA-ratings of RMBS and CDOs. They deepened the crisis with their flip-flopping and their strange downgrades (MBI/ABK; LEH!) at very strange junctures. Hank Paulson will not be amused about how Moody#s and S&P further complicated things and added to trouble by downgrading LEH and AIg while everybody trioed to put bailout plans togehther. I mean, for all the months they had already waited - they could have easily waited for another couple of days, not?

2008 Sep 22 09:20 AM

[briacal:]

Buffett and Moody should be considered financial terrorists if it is true that Buffett owns almost 20





Buffet and Moody should be considered financial terrorists if it is true that Buffet owns almost 20% of Moody

2008 Sep 22 11:11 AM

[briacal:]

Buffett and Moody should be considered financial terrorists if it is true that Buffett owns almost 20% of Moody

2008 Sep 22 11:19 AM

[briacal:]

Buffett and Moody should be considered financial terrorists if it is true that Buffett owns 20%of Moody

2008 Sep 22 11:23 AM

[Old Coach:]

Finally found something on the accounting rules. Saw a comment from Liz Ann Sonders at the Schwab site. She says some discussion is surrounding an adjustment, maybe temporarily, of the mark to market accounting rule. Big picture - this rule has contributed heavily to the death spiral of financials. If it's not adjusted, then banks selling their bad paper to the gov't will have to take immediate losses.

2008 Sep 22 11:39 AM

[oldlures1:]

briacal - it is true, Berkshire is Moody's largest shareholder. And considering Buffett started his own bond insurer earlier this year, does the air not carry the strong scent of fish on it? Percieved or real, there is a conflict of interest. The Connecticut AG raised the issue months ago, but his drum has gone quite. I wonder why?
I've never been a conspiracy theorist, but....

2008 Sep 22 05:41 PM

[oldlures1:]

Also, since on my conspiracy jag, consider this: MBIA agreed to reinsure FGIC's public muni portfolio of biz. This is a big win for MBI! But I bet they beat out Buffett in the bidding. However, if Moody's (note: Buffett is its largest shareholder) downgrades MBIA, and thereby disrupts their acquisition of FGIC's portfolio, that puts FGIC back on the auction block....where Buffett can pick it up for a song....the same cheap song that he offered (and was out-big on before).
Again, just a theory...

2008 Sep 22 05:51 PM

[oldlures1:]

Just curious; am I the only one making these connections?

2008 Sep 22 05:51 PM

[Ishortyou:]

oldlures1 I think you have a pretty good point, certainly a conflict of interest is in play and I hope the FBI gets called in for investigation against market manipulation.

2008 Sep 24 02:22 PM

[Tom Armistead:]

Re: Buffett and Moody's

Buffet has been less than helpful from the beginning of this problem. He was brought in by Dinallo and his first and best offer was to reinsure everybody's business for twice the going rate.

then he went on TV and said that ABK's and MBI's shares prices and credidt default spreads were properly indicative of the company's financial status. He has been around a while and knew better.

Next Moody's (20% owned by Berkshire Hathaway) downgrades MBIA beyond any reasonable need, costing their asset management 300 million in unnecessary losses. Now it's time to take another shot at both ABK and MBI.

If Warren is not really such a nice guy - nice guys finish last.

2008 Sep 25 04:40 AM

[svosavvy:]

I am sorry but these guys got lambasted by fitch back in march/april. At the time I thought it was unfair henpecking by fitch all the while s&p and moody's kept their stamp of approval. Fast forward to now, it appears fitch could see the writing on the wall and the other two agencies were being pandering gladhanders.

2008 Sep 26 11:36 AM