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BAILOUT? - New York Insurance Superintendent watching bond insurers, may intervene
- Thread starter Cdntrader
- Start date
the bond insurers just lunched their own 'the economy is strong and a strong dollar is on our nations interest'
'there is no problem' according to them
http://www.reuters.com/article/bondsNews/idUSWAT00877120080125
'there is no problem' according to them
http://www.reuters.com/article/bondsNews/idUSWAT00877120080125
Quote from Daal:
the bond insurers just lunched their own 'the economy is strong and a strong dollar is on our nations interest'
'there is no problem' according to them
http://www.reuters.com/article/bondsNews/idUSWAT00877120080125
"He said the bond insurance industry is "financially strong. It's a liquidity problem, not a capital problem, if there's any problem at all." "
What does that mean? They can't find anyone to buy the crappy stuff?
Bond insurers seen needing up to $200 bln to remain viable
Fri Jan 25, 2008 3:38pm EST
NEW YORK, Jan 25 (Reuters) - Bond insurers may need up to $200 billion to remain viable, according to analysts, and a government-brokered rescue effort described as being worth $15 billion was dismissed as a Band-Aid.
A cash infusion would allow the bond insurers to maintain their top credit rating, which is critical to their business of guaranteeing trillions of dollars of municipal bonds and asset-backed securities.
Analysts warned that some investors would face huge write-downs of securities guaranteed by the insurers if they lost their top rating, dealing another blow to a bruised U.S. economy. Those concerns contributed to a recent sell-off in stocks.
New York State Insurance Superintendent Eric Dinallo pressed major Wall Street banks this week to contribute billions of dollars to support the bond insurers, also known as monolines.
Some observers on Wall Street and elsewhere believe the New York state-orchestrated plan, which is only in the initial stages, may not go far enough.
"The numbers being bandied about of a $15 billion infusion into the monolines looks to us to be like putting a Band-Aid on a gushing wound," said analysts at hedge-fund Bridgewater Associates in a report to clients on Thursday.
They added that "looking at the price movements on the instruments they insure as well as their existing reserves, we would suggest they would need at least $70 billion on top of current reserves."
Sean Egan, managing director of independent credit-rating firm Egan-Jones Ratings Inc, said he expects roughly $80 billion of eventual losses for the top six monoline insurers.
That means the insurers probably need more than $200 billion to keep their "AAA" ratings, he said.
The news of the rescue plan sent shares of MBIA Inc (MBI.N: Quote, Profile, Research), the largest bond insurer, rocketing higher from a recent 15-year low of around $6.75 last week. Speculation the company won't have enough capital to cover losses on bonds it insures has knocked its stock down from $76 a year ago.
The stock prices of MBIA and Ambac Financial Group (ABK.N: Quote, Profile, Research), the second-largest bond insurer, also soared on Wednesday.
"Somehow (Dinallo) comes up with $5 billion to $15 billion. If the market actually bought that idea as a solution, it would have done that long ago," said Edward Grebeck, chief executive of Tempus Advisors, a debt strategy firm in Stamford, Connecticut.
Dick Smith, an analyst at Standard & Poor's, said on Friday that even less than the $15 billion in capital cited in media reports could be enough to preserve the insurers' capital adequacy.
Still, questions about insurers' business viability have to be resolved to protect their ratings, he said.
Fears are growing that the bond insurers don't have the cash to fulfill obligations on roughly $930 billion of structured finance securities, including mortgage bonds.
With defaults by subprime mortgage borrowers on the rise and subprime-related securities sinking in value, analysts worry that insurers could be on the hook for billions of dollars worth of insurance payouts.
Wall Street banks have invested in ailing securities that have a top rating due to guarantees from the bond insurers. A downgrade of the bond insurers would force the banks to write-down the value of those bonds to reflect the higher risk.
To offset those potential losses on insured bonds, banks may need to raise up to $143 billion in additional capital, Barclays Capital analysts said in a report on Friday.
NEW COMPETITION?
Meanwhile, billionaire Wilbur Ross is weighing the merits of investing in an existing bond insurer or starting his own firm, the Financial Times reported on Friday.
A decision by Ross to launch a new bond insurer could put even more pressure on MBIA and Ambac.
Like Ross, some private-equity firms such as TPG may also be considering launching new bond insurers, the report said. TPG declined to comment.
Billionaire investor Warren Buffett's Berkshire conglomerate in late December was granted a license from New York state to operate as a bond insurer.
On Thursday, The New York Times said that late last year Dinallo encouraged Berkshire Hathaway to enter the bond insurance business.
At the time, Buffett said he did not want to invest in existing guarantors because of their financial problems, and he started his firm instead. (Additional reporting by Jennifer Ablan, Dena Aubin, Richard Leong, Dan Wilchins and Megan Davies in New York and Kevin Drawbaugh in Washington; Editing by Tom Hals)
Fri Jan 25, 2008 3:38pm EST
NEW YORK, Jan 25 (Reuters) - Bond insurers may need up to $200 billion to remain viable, according to analysts, and a government-brokered rescue effort described as being worth $15 billion was dismissed as a Band-Aid.
A cash infusion would allow the bond insurers to maintain their top credit rating, which is critical to their business of guaranteeing trillions of dollars of municipal bonds and asset-backed securities.
Analysts warned that some investors would face huge write-downs of securities guaranteed by the insurers if they lost their top rating, dealing another blow to a bruised U.S. economy. Those concerns contributed to a recent sell-off in stocks.
New York State Insurance Superintendent Eric Dinallo pressed major Wall Street banks this week to contribute billions of dollars to support the bond insurers, also known as monolines.
Some observers on Wall Street and elsewhere believe the New York state-orchestrated plan, which is only in the initial stages, may not go far enough.
"The numbers being bandied about of a $15 billion infusion into the monolines looks to us to be like putting a Band-Aid on a gushing wound," said analysts at hedge-fund Bridgewater Associates in a report to clients on Thursday.
They added that "looking at the price movements on the instruments they insure as well as their existing reserves, we would suggest they would need at least $70 billion on top of current reserves."
Sean Egan, managing director of independent credit-rating firm Egan-Jones Ratings Inc, said he expects roughly $80 billion of eventual losses for the top six monoline insurers.
That means the insurers probably need more than $200 billion to keep their "AAA" ratings, he said.
The news of the rescue plan sent shares of MBIA Inc (MBI.N: Quote, Profile, Research), the largest bond insurer, rocketing higher from a recent 15-year low of around $6.75 last week. Speculation the company won't have enough capital to cover losses on bonds it insures has knocked its stock down from $76 a year ago.
The stock prices of MBIA and Ambac Financial Group (ABK.N: Quote, Profile, Research), the second-largest bond insurer, also soared on Wednesday.
"Somehow (Dinallo) comes up with $5 billion to $15 billion. If the market actually bought that idea as a solution, it would have done that long ago," said Edward Grebeck, chief executive of Tempus Advisors, a debt strategy firm in Stamford, Connecticut.
Dick Smith, an analyst at Standard & Poor's, said on Friday that even less than the $15 billion in capital cited in media reports could be enough to preserve the insurers' capital adequacy.
Still, questions about insurers' business viability have to be resolved to protect their ratings, he said.
Fears are growing that the bond insurers don't have the cash to fulfill obligations on roughly $930 billion of structured finance securities, including mortgage bonds.
With defaults by subprime mortgage borrowers on the rise and subprime-related securities sinking in value, analysts worry that insurers could be on the hook for billions of dollars worth of insurance payouts.
Wall Street banks have invested in ailing securities that have a top rating due to guarantees from the bond insurers. A downgrade of the bond insurers would force the banks to write-down the value of those bonds to reflect the higher risk.
To offset those potential losses on insured bonds, banks may need to raise up to $143 billion in additional capital, Barclays Capital analysts said in a report on Friday.
NEW COMPETITION?
Meanwhile, billionaire Wilbur Ross is weighing the merits of investing in an existing bond insurer or starting his own firm, the Financial Times reported on Friday.
A decision by Ross to launch a new bond insurer could put even more pressure on MBIA and Ambac.
Like Ross, some private-equity firms such as TPG may also be considering launching new bond insurers, the report said. TPG declined to comment.
Billionaire investor Warren Buffett's Berkshire conglomerate in late December was granted a license from New York state to operate as a bond insurer.
On Thursday, The New York Times said that late last year Dinallo encouraged Berkshire Hathaway to enter the bond insurance business.
At the time, Buffett said he did not want to invest in existing guarantors because of their financial problems, and he started his firm instead. (Additional reporting by Jennifer Ablan, Dena Aubin, Richard Leong, Dan Wilchins and Megan Davies in New York and Kevin Drawbaugh in Washington; Editing by Tom Hals)
Quote from Eliot Hosewater:
"He said the bond insurance industry is "financially strong. It's a liquidity problem, not a capital problem, if there's any problem at all." "
What does that mean? They can't find anyone to buy the crappy stuff?
he must be talking about the mark to market losses they are taking because the cdos, cmbs,rbms securities spreads are widening out. to them 'market to market losses dont count', I think by now their pretty much the only group on wall street who thinks they wont take significant losses on structure finance garbage
Quote from Cdntrader:
New York Insurance Superintendent watching bond insurers, may intervene
Fri Jan 18, 2008 4:28pm EST
By Joseph A. Giannone
NEW YORK, Jan 18 (Reuters) - New York Insurance Superintendent Eric Dinallo on Friday said the state is monitoring the struggles of bond insurers and would be willing to help broker capital infusions to keep these market players afloat.
"We are very mindful of the situation and are as reasonably on top of it as we can be," Dinallo told Reuters on the sidelines of a press conference, where New York Governor Eliot Spitzer had outlined plans to update the state's financial services regulation.
Dinallo declined to comment on the state's efforts specific to Ambac Financial Group (ABK.N: Quote, Profile, Research), a bond insurer that has been hammered by losses stemming from the mortgage crisis and a ratings cut on Friday..
Dinallo spoke shortly before Fitch Ratings cut its top "AAA" for Ambac Assurance Corp to "AA" after the bond insurer scrapped plans to issue $1 billion of new equity.
Standard & Poor's said it also may slash its "AAA" rating for Ambac as well.
"I can say one thing: We are there, to help facilitate an injection of capital, if that ends up being the right idea, or if things go in the wrong direction, to do a quick rationalization of their situation," he said.
Dinallo said the state has broad authority and is working with other states and federal U.S. agencies on the matter of struggling bond insurers.
"I think the role of the regulator has to be a facilitator. To speed in or somehow facilitate those possible bailouts or transactions, that is our number one goal as a regulator right now," he said.
Dinallo played a role last month in convincing Warren Buffett's Berkshire Hathaway Inc (BRKa.N: Quote, Profile, Research) to launch a bond insurer, Berkshire Hathaway Assurance Corp. Berkshire has very strong credit ratings and is expected to help keep the state's borrowing costs down.
Municipal issuers finance such things as hospitals, road construction, schools, sewer systems and sports facilities. They often seek bond insurance to reduce the risk of owning their debt, which can attract more investors and reduce borrowing costs and saving taxpayers money. (Reporting by Joseph A. Giannone; Editing by Brian Moss, Leslie Gevirtz)
if you asked the CEO for a ride in his mercedes, he'd tell you to go f-ck yourself
those premiums were paid for his huge salary, not to cover risk. the risk belongs to the citizen
Man, forget when the ratings downgrade will come, if there is no clear plan looks like the market will discount the problems and they might very well go into panic selling
http://www.reuters.com/article/mark...125?rpc=44&pageNumber=1&virtualBrandChannel=0
http://www.reuters.com/article/mark...125?rpc=44&pageNumber=1&virtualBrandChannel=0
Quote from Cdntrader:
16:45 ABK AMBAC Fincl: WILBUR ROSS IN TAKEOVER TALKS WITH AMBAC FINANCIAL GROUP INC, according to UK'S EVENING STANDARD - Reuters (11.33 -2.37)
WILBUR ROSS TAKEOVER TALKS WITH ABK ARE SERIOUS AND PROGRESSING WELL
1) he is probably looking at some ay to buy the Muni insurance business without the CDO liabilities.
2) My observation is that in this type of situation a supposed solution or investor comes forward but it is rare that it follows through - meanwhile someone has got out of some stock.................