BAILOUT? - New York Insurance Superintendent watching bond insurers, may intervene

"Oppenheimer discusses fate of monoline insurers; says C, MER, and UBS hold over 45% of the entire market risk

Oppenheimer notes they have dramatically changed their thought process with respect to the monolines and their impact on banks and the larger financial market. While they had previously believed the monoline insurers MBI and ABK were too important to fail due to the threat of systemic risk and thus would likely be bailed out, they no longer think systemic risk is even realistic or a bailout of the monolines even viable. The firm assesses what they believe is the highly concentrated collateral damage to the banks they cover, and estimate that additional write-downs could be as large as $70 bln, but would more likely be roughly $40 bln throughout 2008. Importantly, however, they believe the majority of those write-downs will be concentrated among three institutions: C, MER, and UBS."
 
As Merrill discussed earlier this month, its net exposure to collateralized debt obligations hedged by monoline insurers is about $3.5 billion.

Thain said if monolines "disappeared from the face of the earth" -- which he didn't expect to happen -- they would owe Merrill Lynch about $6 billion.

In any case, Merrill has reserved $2.6 billion against the $6 billion, leaving about $3.5 billion in monoline exposure, Thain said.
 
From briefing.com:
"MBI MBIA Inc and Ambac tick lower as CNBC commentator reports that short seller Bill Ackman is writing a letter to the NY State insurance commisioner... saying the problems at MBI and ABK are far worse than the previously stated (14.48 -1.53)"

run-off?
 
call me krazy, and u will, if the price declines, but i think with so many of wall streeters ready to throw out ABK and MBI, i am doing contra.

:eek: :eek: :eek:
 
Quote from Daal:

From briefing.com:
"MBI MBIA Inc and Ambac tick lower as CNBC commentator reports that short seller Bill Ackman is writing a letter to the NY State insurance commisioner... saying the problems at MBI and ABK are far worse than the previously stated (14.48 -1.53)"

run-off?
More...

gasparino saying downgrades imminent.
 
Quote from Daal:

gotta love ackman and fitch. they both alone reversed the rally of the year
More...

Yes. Feels like we are getting close to decision time. Something has to give one way or the other very soon.
 
S&P Lowers or May Cut Ratings on $534 Billion of Mortgage Debt

By Emma Moody

Jan. 30 (Bloomberg) -- Standard & Poor's lowered or may cut ratings on $534 billion of residential mortgage securities and collateralized debt obligations.

The securities represent $270.1 billion, or 6,389 classes, of mortgage securities rated between January 2006 and June 2007 and $263.9 billion, or 1,953 classes, of CDOs, S&P said today in a statement.
 
Bond Insurers May Be Downgraded As Soon As Today


Wall Street bond rating agencies could downgrade two big bond insurers, Ambac Financial Group and MBIA, as early as today even though New York state insurance regulars would like to get a postponement until the state can develop a bailout package, CNBC has learned.

Losing a Triple A rating could be devastating for the bond insurers, preventing them from drumming up new clients -- and possibly forcing them out of business.

The ratings agencies realize they're walking a tight rope -- if they downgrade the insurers, they could expedite their demise. On the other hand, if they follow New York's request and don't downgrade, they're in essence violating their duty to downgrade bonds on objective criteria.

Moody's downplayed the likelihood of striking a deal with New York, however. A spokesman for the ratings agency confirmed that Moody's has had conversations with the Insurance Department, but said "we don't forbear on our ratings" based on talks with government officials.

Standard & Poor's had no comment.

The New York State Insurance Department has hired Perella Weinberg Partners to advise on developing a bailout of the bond insurers, a spokesman for the department said on Monday.

As CNBC reported last week, banks that met with Insurance Superintendent Eric Dinallo asked him to hire an outside financial advisor.

Sources told CNBC that New York is considering one of two approach as a bailout plan: either a line of credit that bond insurers could tap as needed, or a deal that would deal with each insurer on an individual basis.

Bond insurers, who guarantee more than $2 trillion of securities, have suffered write-downs of bonds and derivatives linked to subprime mortgages. The losses are big enough to potentially trigger ratings downgrades, forcing some investors to sell securities guaranteed by the bond insurers.



Last week, New York State Insurance Superintendent Eric Dinallo met with banks to encourage them to put up cash to support bond insurers.

Perella Weinberg is looking at ways to protect policyholders of the major bond insurers.

Besides Ambac, another major insurer is

- Reuters contributed to this report.
 
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