As Scooby-Doo would say:

RUH-ROH!!!

This doesn't sound good. Home prices only go up! We aren't building more land!

Aren't they supposed to wait till after options expiry to announce this stuff? lol

Moody's statement:

New York, February 14, 2008 -- Moody's Investors Service has downgraded to A3, from Aaa, the insurance financial strength ratings of the operating subsidiaries of FGIC Corporation, including Financial Guaranty Insurance Company and FGIC UK Limited (collectively "FGIC"). Moody's has also downgraded the senior debt rating of the holding company, FGIC Corporation to Ba1 from Aa2, and the contingent capital securities ratings of Grand Central Capital Trusts I-VI to Baa3 from Aa2. These rating actions reflect Moody's assessment of FGIC's meaningfully weakened capitalization and business profile resulting, in part, from its exposures to the US residential mortgage market. These ratings remain on review for possible downgrade, reflecting continuing uncertainty about the firm's strategic and capital plans. An unfavorable outcome in those areas could lead to a lower financial strength rating most likely to the Baa level.

These rating actions result from Moody's ongoing assessment of ratings in the financial guaranty insurance sector, and follow the downgrade on February 7, 2008 of XL Capital Assurance Inc., from Aaa to A3. Among primary financial guarantors, Moody's ratings of MBIA and Ambac remain under review for possible downgrade, with those reviews expected to conclude within the next few weeks. Although further analysis remains to be completed before those reviews can be brought to conclusion, Moody's believes that, in contrast to XL Capital Assurance and FGIC, MBIA and Ambac are better positioned from a capitalization and business franchise perspective.

Moody's Bond Ratings are intended to characterize the risk of holding a bond. These ratings, or risk assessments, in part determine the interest that an issuer must pay to attract purchasers to the bonds. The ratings are expressed as a series of letters and digits. Here's how to decode those sequences.

Rating "Aaa"
Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edged." Interest payments are protected by a large or an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues.

Rating "Aa"
Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risk appear somewhat larger than the Aaa securities.
Rating "A"
Bonds which are rated A possess many favorable investment attributes and are considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment some time in the future.
Rating "Baa"
Bonds which are rated Baa are considered as medium-grade obligations (i.e., they are neither highly protected not poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well.
Rating "Ba"
Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate, and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class.
Rating "B"
Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments of of maintenance of other terms of the contract over any long period of time may be small.
Rating "Caa"
Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest.
Rating "Ca"
Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.
Rating "C"
Bonds which are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.
A Moody rating may have digits following the letters, for example "A2" or "Aa3". According to Fidelity, the digits in the Moody ratings are in fact sub-levels within each grade, with "1" being the highest and "3" the lowest. So here are the ratings from high to low: Aaa, Aa1, Aa2, Aa3, A1, A2, A3, Baa1, Baa2, Baa3, and so on.

Love the false precision marketing gimmick by Moody's. GIGO - to 8 decimal places!

Although I am always intrigued and tempted to call Wall Streets bluff of "If you don't help us, the world will end and then you'll be sorry, you'll all be very sorry." ( insert evil cackle here)

OMG I laughed so hard at that.

Dinallo works for Buffet it seems. Unprecedented what his office has done for BRK.

Dinallo: "I felt a bit like Will Smith in "I am Legend" going around and letting everyone know how serious this is."

Has anybody ever had their rating cut six levels without going in to Bankruptcy. I can't wait for the next shoe to drop on the rest of these guys!

well the booms and busts certainly keeps these people busy changing the ratings....

Every 100% closed end auction rate preffered failed today. What are you going to sell to get your money! This is spreading fast. San Mateo's bond offering failed today. San Mateo is one of the richest counties in the Country.

I need some help, but why can't they slice the bonds to very tiny pieces so that small investors looking for bargain can participate? I'm sure if you offer me 10% yield on a San Mateo county bond (tax-free in CA) I'd be interested if I am not required to buy a minimum of $100K or so.

tj,

Those numbers are just silly.

NBR -18....hmmm....

TAC up ~10 NBR down ~10

I've gotta go. The old hats starting to spark, and get really hot.

Cheers,

pricedOut

There are all kinds of muni's. The type here have to be auctioned every so often, to set interest rates. Given the shakiness of the market, no one wants to hold them for the term until the next auction.

Slicing and dicing into tiny things would greatly increase the cost of fees to market them. Way to expensive for the muni to be worth while for the issuer.

Cheers,

Ambac CEO: We guaranteed 4 CDO^2 and we are going to pay out a billion dollars. We're not happy about that. We are not going to insure CDOs or CDO^2 anymore.

We at least they learned.

FGIC is a good candidate to take up Buffett's offer. If the priority is protecting the holders of municipal bonds, this is the fastest, best, and probably cheapest way to resolve that problem.

I don't think there is another likely proposal that does as much for bondholders.

Among other things, who would really want to go head to head with Berkshire for new business? Remember that all new business depends on the market response to the credit enhancement.

Ackman's talking about "lending in the Jimmy Stewart era". This is great.

So, what are the odds that the agencies will NOT downgrade MBIA and Ambac? Do any of the more knowledgeable posters have a view?

Moody's comment re. MBIA and Ambac being better positioned compared to FGIC, makes me think they might be signaling "more analysis is necessary" and will affirm ratings - or some variant of that BS.

Any opinions? Why would the agencies actually do the downgrade? Since everyone that's paid (or will pay) for the ratings have it in their best interests for the downrade not to occur? Weird!