pcyhuang

Stress Tests: Banks vs. Bond Insurers

Hi, Tom:

>"a margin of safety of 1.25x signifies that ending capital exceeded losses by 25%. Stated another way, losses could have been 25% larger without driving the statutory capital to zero."

Now let's look at ABK's liquidity ratio:

siliconinvestor.advfn....

Cheers,

MBIA's New Structure

The model of the pure public-finance insurere would work if the federal government puts a stop-loss on any policy written, after an initial deductible loss taken by the insurer. The would help to restore the AAA rating, clients' confidence, and the securitization market.

Will TARP Cover Both Ambac and MBIA?

Tom:

I have enjoyed reading your very sensible analysis about MBI and ABK.

Here's an article by the New York State Insurance Regulator on the Prospects of the Financial Guarantors:

Oct. 8 (Bloomberg) -- Eric Dinallo, superintendent of the New York State Insurance Department, comments on the outlook for the bond insurance industry. He spoke in an interview on Bloomberg Television.

On whether there's a future for bond insurers:

``I think the news about the housing sales going up is really huge, because that implies that we've begun to hit bottom on the defaults and the market is beginning repricing. Then that means the defaults will begin to end as you can get some kind of a mortgage or some sort of transaction that clears prices.

``If that happens, then the defaults will level off, as we've said time and again, then you begin to see the bond insurers not have such a black hole that they have to pay off on. ``I think they do have a life and a future. I think the muni-market is being hammered in part because everyone's frozen, they don't know what rating they're going to go to market on.

``Once they figure out the future ratings, what they want to come to market as, I've said before that tens of thousands of small municipalities still have to commoditize. They've got to be tradable at a price, and that means at a rating. Because all of these traders are not going to do diligence for all of the municipalities out there, and that's what I think bond insurance's biggest opportunity is, is to commoditize them.

On why bond insurers aren't on the federal government's bailout list: ``If the other side of their obligations is on the list, in other words if you see those CDOs getting sold into the $700 billion marketplace, then presumably the CDSs that the bond insurers have written get extinguished. ``That will be a huge up-tick for the position of bond insurers. If they get through this, then we will begin to see credit unfreeze, municipalities come to market.''

Of Guarantees and Printing Presses

Your article just shows your total ignorance about the need and importance of one of the leaders in the financial guarantee business.

----

Oct. 8 (Bloomberg) -- Eric Dinallo, superintendent of the New York State Insurance Department, comments on the outlook for the bond insurance industry. He spoke in an interview on Bloomberg Television.

On whether there's a future for bond insurers:

``I think the news about the housing sales going up is really huge, because that implies that we've begun to hit bottom on the defaults and the market is beginning repricing. Then that means the defaults will begin to end as you can get some kind of a mortgage or some sort of transaction that clears prices.

``If that happens, then the defaults will level off, as we've said time and again, then you begin to see the bond insurers not have such a black hole that they have to pay off on.

``I think they do have a life and a future. I think the muni-market is being hammered in part because everyone's frozen, they don't know what rating they're going to go to market on.

``Once they figure out the future ratings, what they want to come to market as, I've said before that tens of thousands of small municipalities still have to commoditize. They've got to be tradable at a price, and that means at a rating. Because all of these traders are not going to do diligence for all of the municipalities out there, and that's what I think bond insurance's biggest opportunity is, is to commoditize them.


On why bond insurers aren't on the federal government's bailout
list: ``If the other side of their obligations is on the list, in other words if you see those CDOs getting sold into the $700 billion marketplace, then presumably the CDSs that the bond insurers have written get extinguished. ``That will be a huge up-tick for the position of bond insurers. If they get through this, then we will begin to see credit unfreeze, municipalities come to market.''


Shttp://messages.finan...


Cheers,

Ambac, MBIA: Moody's strikes again

glassbox:

SEC tightening rules on short selling:

www.investorvillage.co...

Cheers,

Ambac, MBIA: Moody's strikes again

Federal Reserve Chairman Bernanke testified today before the Senate Banking Committee. and explained that “hold to maturity” valuations are greater than the current fire sale market value, and the difficult balance between promoting higher pricing to support financial institutions and causing tax payer losses by being excessively generous..

Imagine if ABK would be able to liqudiate its CDS portfolio according to "hold to maturity" valuation.

Cheers,

Cheers,

Ambac, MBIA: Moody's strikes again

The huge market for credit default swaps, a derivative behind many of
the problems roiling the financial markets, will get some regulatory
oversight from New York state, Gov. David Paterson announced Monday.

Credit default swaps are contracts that enable institutional investors
to bet on the likelihood of companies defaulting on the debts. The
market for these contracts has grown from nothing a decade ago to $62
trillion of notional volume this year. Despite this extraordinary
growth, the credit default swaps market has remained outside the
purview of federal or state regulators, largely because they accepted
Wall Street’s argument that swaps are not securities or insurance
policies.

That seems poised to change. Mr. Paterson said the state Department of
Insurance issued guidelines to establish that credit default swaps are
a form of insurance and, hence, subject to state regulation.

“We are going to ensure that whoever sells them [credit default]
protection is solvent, in other words, can actually pay the claims,”
said Eric Dinallo, the New York state Department of Insurance
superintendent. “There is currently no such protection for
policyholders.”

Credit default swaps were a major factor in the difficulties
experienced by American International Group Inc., the giant insurer
taken over by the federal government last week. AIG wrote insurance
against tens of billions worth of credit default swaps and had to post
billions of additional collateral when the value of those swaps
declined due to growing mortgage defaults, causing the losses that
nearly bankrupted the firm.

"The state of New York should proceed very cautiously and in
consultation with federal regulators before acting in a way that may
ultimately cause more harm than good," said Robert Pickel, executive
director and chief executive officer at the International Swaps and
Derivatives Association, a trade group representing Wall Street firms.

Source: www.crainsnewyork.com/...

Comment: Great boost of confidence in ABK, MBI and other licensed
financial guarantors.