Moody's: Concerned about MBIA and Ambac
Submitted by
CalculatedRisk on Tue, 05/13/2008 - 12:56pm (55 comments)
Shopping at Amazon?
Wait! If you click on the Amazon banner link at the top of the page first, HCN will get a percentage of anything you purchase for 24 hours!
Open predictions
Our local book authors
User login
Who's online
There are currently 31 members and 181 guests online.
Recent Recommendations
Wow. That is timely.
also...
AIG to Raise More Than $17 Billion in Debt and Equity
philanthropy alive and well.
Expect a Minnesota bank failure next or soon...
Under the shady tree
Citigroup Inc. and JPMorgan Chase & Co. are handling the offerings. The underwriters may purchase as many as 25.7 million more shares and 6.4 million more equity units to satisfy demand, AIG said today
When we saw lottery tickets issued and lines formed where people camped out for days in a row for the privilege to pay top dollar to buy a home with NOTHING DOWN, how can anyone be surprised by the results?
If only karl would explain it to us, then we could understand better. :
MBIA and Ambac should have been stripped from AAA long ago and everyone knows it!
Can we get a governor to look into this financial guarantor mess...
Tanta could sell vintage pools on ebay and still find the time to entertain us on a daily basis. Somebody call Bezos.
Jeff Bezos - Wikipedia, the free encyclopedia
Anyone knows WHO is funding AIG, CITI, etc all these billions????
Definitely not the SWFs anymore, could it be the FED>????
Opinions please.
Moody's is all fart and no shit. This is going nowhere, fast.
With all this handwringing, Moody's is going to pull that handkerchief apart.
FFDIC, ahhh ... it doesn't seem like a Friday without a bank failure!
Best to all.
Yeah, those FDIC employees work their 40 hour weeks in 4-5 days and then knock off OT all weekend long plus extra holiday pay when closings fall on holiday weekends. Plus a per diem. The retirees are pulling down their pensions, social security under FERS and their new FDIC salary for going back on duty. And, contractor pay is obsence. Then there are special cash awards, STAR awards, Chairman's awards and a big bonus for white male heterosexual managers. I'm probaby forgetting something...
FFDIC, ahhh ... it doesn't seem like a Friday without a bank failure!
There's another reason it doesn't feel like a Friday...
Air Force is expected this week to award either Lockheed Martin Corp. or Boeing Co. a contract worth about $1.8 billion to build eight next-generation global positioning satellites.
The deal could ultimately be worth more than $4 billion
Business finance news - currency market news - online UK currency markets - financial news - Interactive Investor
More inflationary government spending pumping into the fractional reserve banking system Multipy X 10
Anyone knows WHO is funding AIG, CITI, etc all these billions????
Definitely not the SWFs anymore, could it be the FED>????
Opinions please.
BB
don't know, but i'm sure it's been sterilized
Just you wait 'till the loss provisions are updated next.
These 'losses' are optimistic.
"Expect a Minnesota bank failure next or soon...
FFDIC "
C'mon, man, spill it. What do you know?!?!?
Charlie Gasparino better get his suit jacket dry cleaned. He'll be getting a lot of camera time with his next round of rumors.
FFDIC - Is the FDIC ready to put IMB out of its misery yet. It needs capital too, while the free money from the Fed seems to be in endless supply.
Trading $2.20/sh...
AIG is KBR's insurer in Iraq. Roughly 5 cents of every labor dollar goes to AIG. Unless, of course, KBR found a way around paying them premiums, by say, using off-shore subsidiaries for payroll.
Mn bank list:
Bank Links Minnesota
"raising concern about their Aaa status..."
There's a greater chance of President Cheney admitting to mistakes in Iraq than there is of Moody actually doing anything concrete with its "concern."
Concerned about Ambac - Still AAA!
CapitalOne must be STARVED for deposits - offering 3.75% APY. This is a last gasp effort used by IMB, CFC, FRE... all on the ropes The FDIC should slap these jokers around.
BB
I have heard the theory (which makes sense to me) that the hedgies buy the bank debt which of course is financed by their broker-dealer which is backstopped by the Fed. The hedgies then short the underlying stock and lock in a profit- guaranteed until somebody defaults that is. That is why the CFC thing is so important to the scheme. Can't have a default or it ruins the game.
Financial Regulation Commissioner Don Saxon told Gov. Charlie Crist and the Florida Cabinet that his office and the Legislature are taking steps to root out money laundering and other criminal activity.
Money service businesses also include currency exchanges, money transfer companies and pay day lenders. They don't get the same scrutiny as banks, credit unions and other financial institutions, which makes them an attractive conduit for criminals.
"This is a billion dollar criminal activity going on in our state," said Chief Financial Officer Alex Sink. "We definitely need to have a lot more teeth into our enforcement activities."
Sink is a member of the Cabinet, which oversees Saxon's office jointly with the governor.
A statewide grand jury in March issued a report saying the state's lax enforcement has "inadvertently created a shadow banking industry" virtually free of regulation.
Criminals use it to launder profits from a variety of illicit activities including Medicaid, Medicare and workers compensation fraud. In some cases construction companies have used check cashing businesses to avoid paying taxes and conceal the employment of illegal immigrants.
The report blames weak laws and a failure by regulators to use the tools they already have.
Business finance news - currency market news - online UK currency markets - financial news - Interactive Investor
Regulators not using tools they already have, shadow banking system. Shocking I tell you. Just like Moody's
For more background on Finance Guy's comment, see Mish quoting Mr. Practical of Minyanville:
Mish's Global Economic Trend Analysis: Fannie Mae Gets Married
(apologies for not knowing how to make the link look nice)
Financeguy
Thanks for the insight.
The longer the crisis goes on the more convinced i am that this will not be a sprint to the bottom (after which real recovery can work) but a slow grinding trudge.
And this will be most favorable scenario that the powers that be are inclined to work towards and hope for.
I shudder at this thought.
Thanks AJW- that is probably one of the places that I read about this.
Yep BB I think slow grind is in order unless the bond market pushes the long bond somewhat higher. With all of the Treasury borrowing needs and the housing market impact the 10 year is worth watching. Until then I think it is the same old playbook of slowly acknowleding losses and trying to recapialize over time. If the bond market get's away not much Ben can do about it anyhow....
That is why the CFC thing is so important to the scheme. Can't have a default or it ruins the game.
That's where the Dodd-Frank bailout comes in. The bill provides $300 billion in taxpayer loans through the FHA-- the banks get to cherry-pick the worst loans and the taxpayer is 100% responsible. The bill doesn't even say who will appraise the loans! Its a purge and it makes CFC worth buying... the Senate is marking it up in Committee this week.
This one is cute:
FT.com / Financials - JPMorgan faces $9bn charge for Bear clean-up
JPMorgan Chase is to take a charge of about $9bn half as much again as its estimate to clean up Bear Stearns balance sheet and pay for redundancies and litigation arising from its cut-price takeover of the stricken investment bank.
Jamie Dimon, JPMorgans chairman and chief executive, told a banking conference organised by UBS that the higher costs were driven by the losses suffered by Bear this year and the larger-than-expected amount of bad assets on its books.
etc...
Angryrenter
Great point- Although the last I read it was not going to make it out of committee or Bush would veto. People need to keep the pressure on...
Wasn't there a BNC mortgage company? Dunno if related to the bank but for fun that is who I will put my money on.
OK, I'll parse this out in an attempt to help people re-read this story:
MBIA Inc. and Ambac had ``meaningfully'' higher losses, raising concern about their status
The losses elevate ``existing concerns about capitalization levels.
Moody's noted that losses "greatly exceeded" expectations.
... Moody's increased its loss projections on loan pools
Ouch!
Cal, I agree and will gladly take any deposits against your bet in the fbaf for holding purposes.
Disclosure: we will not accept any MBS AAA paper... Swaps we will honor are 30 nights with jesica alba, 30 cases of Surly bourbon one, 21 days fishing the pacific coast of panama, 30 days of Beyonce royalty payments, Gold, 30 day supply of round table pizza or 20 cases of kendall jackson 2004 cabernet savignon trace ridge...
The sources also said that of 6,000 Bear staffers offered jobs, a little more than half are regarded as "lift and drops," meaning employees who can be lifted from businesses where JPMorgan is not strong, such as prime brokerage, clearing, energy trading and some investment banking coverage.
JPMorgan may cut 4,000 jobs on Bear deal, markets
| Reuters
The other ones are dropped and kicked.
They are still breathing!
WASHINGTON, May 13 (Reuters) - Fremont General Corp FMNT.PK, which was one of the largest U.S. providers of subprime mortgages, on Tuesday told regulators it will not file its quarterly financial report on time
Let's just say it would be bittersweet for me if BNC failed...
That being said, I hope it is.
And we trust Moody's why?
AngryRenter -
The CBO is now estimating that the cost to taxpayers of the Frank bill will be $1.7B. This is lower than recently reported estimates of $2.6B because requirements for participants have been tightened and lenders are expressing a real lack of interest in participating.
Taxpayers would only be on the hook for $300B if every eligible borrower took part in the program, every borrower defaulted anyway and the government was able to recoup nothing from the sale of foreclosed land and buildings.
Even if the cost to taxpayers is double the CBO estimates and ends up costing us $3B, it's still only about the cost of one week in the sandbox debacle. I don't like bail-outs either, but it seems like a reasonable price to pay to slow down the devastation of communities, cities and states that's occurring as we speak.
See:
Housing bailout: Little cost but also little help - May. 12, 2008
The CFC theory and CDS's -- I don't know the exact trigger for CDS's, but as long as BAC takes the referenced debt (not their balance sheet), then they haven't defaulted, regardless of where their toxic balance sheet ends up.
As far as all the hand wringing over MBIA'a Aaa rating, I'm not getting why it matters to MBIA. 1Q they wrote $100 million of business vs. $400 million for Buffett. No one has ever said anything about a downgrade forcing MBIA to put up collateral. And the last couple of rounds of equity to keep the rating strike me as justifiable only from the point of view of management who want to keep their jobs. The stockholders would have been better off if had just taken the downgrade rather then diluted to death to write a lousy $100 million that Buffett probably wouldn't take.
I would love to see the reaction of the holders of CFC and BSC CDS's when the company fails but the debt is bailed out. Among other things, they can hardly cry to the public about how unfair it is that they can't cash in their speculative chips because something didn't fail. Their only option is to cry about moral hazard and look for something that is less likely to get bailed out. I wouldn't care except I don't like the idea of hedgies shorting the markets to zero. I'd also love to see if the various investigations find some of BSC's prime brokerage customers giving it that last little nudge off the cliff - while holding bets on their failure.
Since this crap is OTC, we can only speculate. But the numbers could be huge.
"Ziggurat writes:
...
As far as all the hand wringing over MBIA'a Aaa rating, I'm not getting why it matters to MBIA. 1Q they wrote $100 million of business vs. $400 million for Buffett. No one has ever said anything about a downgrade forcing MBIA to put up collateral...."
I don't follow credit closely, but my understanding is that MBIA (and ABK) have modified versions of CDS contracts. They do not make an immediate payout in the case of default, rather they continue to pay the existing payment stream of the insured entity. I.e., matches behavior of insured bonds.
Which means that if they insure a 30-year bond (for example) that defaults, they only need to cover the coupon stream for the next 30 years before worrying about the principal.
Therefore, it is possible that even if the bears are right, it might take a long time for MBIA to go bust.
JPMorgan Chase is to take a charge of about $9bn half as much again as its estimate to clean up Bear Stearns balance sheet and pay for redundancies and litigation arising from its cut-price takeover of the stricken investment bank.
If that takes into account the 38 billion from the Fed, 47 billion loss total?
FINALLY!!! Now cut!
This matters not so much to MBIA and Ambac as the market knows they are useless... It matters to banks under their Basle II internal models that still follow ratings. The capital hit will be significant IF the raters have the integrity to do what should have been done long ago.
Actually, I am a little concerned about Capital One and WaMu as they are still running their credit card offers. They no longer offer 0% but will try to give you an offer if you have a high balance coming off 0% rate.
Capital One gave me 0% for 12 months and then offer me 0% at the 12th month for 18 months if I use the checks prior to the deadline. I guess that they were hoping that I would not pay off the balance and just use up the available credit. Of course, I have reserves so I did what any financial guy would do. I paid off the balance and then used the check to write myself a check for the max amount. So, I get to use the money for 18 months at 0% for a total cost of $199. Crazy. but WaMu did the samething. At least, WaMu charged me 2.9%
Pool=CDO.
Anyways did any catch that This American life the guy said that his CDO had pieces of 60 million mortgages!
Ziggurat:
I'd also love to see if the various investigations find some of BSC's prime brokerage customers giving it that last little nudge off the cliff - while holding bets on their failure.
What stops CDS holders, owning CDSs representing "protection" for 10-20-30X the actual amount of debt supposedly guaranteed by the CDS contracts, from finding a way to push the underlying company over the edge at the cost of just "X". Could get interesting.
Cathh G,
Since when is $300b something to sniff at. That's a big loss in my book.
As for MBIA they are up to their eye balls in home equity loans. Look for this to get worse for them. See BofA's announcement about these loans today.
Every time I see another horror for the monolines, I feel bad for that poor Siv guy who was out here a few months back. It has been pure money to short every pop in these things.
Anyways did any catch that This American life the guy said that his CDO had pieces of 60 million mortgages!<
I think it was 16, not 60 -- but still a big number.
Also, they likely did more then 1 CDO and maybe even a CDO^2.
If they actually owned parts of 60 million mortgages, there would be a lot of good ones.
The part I found interesting was when the 'programer' used a spreadsheet for their data.
Maybe not true, but excel doesn't have that many rows. Access blows up at a million records (or used to) or less.
It's sort of weird because, on the one hand, excel is totally abused in corporate environments, and maybe with quad core computers it could be done. In other words, they would have done it if the could. Any sort of robust database could handle it easily.
I could see the entire analytical guts of a financial enterprise's data being controlled by a single nerdy guy with a spreadsheet from hell.
I get the feeling that he is a young guy and this is going to give him a much better lesson in markets then available elsewhere.