Thursday, January 17, 2008


Problems for bond insurers.

Jan. 17 (Bloomberg) -- The risk that bond insurers including MBIA Inc. and Ambac Financial Group Inc. will default rose to a record after ratings firms increased their scrutiny of the companies as the value of mortgage-linked securities they guarantee plunge.


Ambac may lose its AAA credit rating after reporting larger losses than the company previously indicated, Moody's said in a statement yesterday. S&P is examining all bond insurers after increasing its predictions for losses on subprime mortgages.

Ambac and MBIA are the two Jenga pieces which will pull the whole shitpile down. They insure all of the shitpile, allowing everyone to pretend that all of the risky stuff they own isn't risky at all. But that insurance is most likely a complete fantasy as it seems Ambac and MBIA don't have the cash to pay out claims. I should've gotten into the bond insurance business. Lower their ratings, you destroy their businesses. More than that, you wipe out the insurance fantasy, forcing everyone who insured with them to admit they have all this risky stuff on the books. Recognizing, of course, that in this context "risky" is just a euphemism for "shitty."

Ambac is currently down 64%. MBIA is down 26%.