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HenryTo
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 Posted: Thu Nov 15, 2007 10:18 am Post subject: Bond Insurers |
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This continues to bear watching going forward:
http://www.bloomberg.com/apps/news?pid=20601109&sid=aOjl_Hy9ibBI&refer=exclusive
| Quote: | Insurers could boost their padding by reinsuring the securities they guarantee, Fitch analyst Keith Buckley said on a conference call Nov. 8.
Banks may step in to back the companies because it would be cheaper than taking more writedowns, Michael Barry and Seth Levine, analysts at Charlotte, North Carolina-based Bank of America Corp., wrote in a report.
``The securities industry, no small force, has a keen interest in the financial guarantors remaining healthy and rated AAA,'' they wrote. ``Financial guarantors would not have to look far for help making sure the demand was met.'' |
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rffrydr
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rffrydr
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rffrydr
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rffrydr
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| Posted: Thu Jan 31, 2008 8:31 am Post subject: |
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Real Property vs. Markets. Saying it simply:
| Quote: | One of the real problems about a CDO and financial regulations is the necessity to mark to the market.
CAn you imagine the prospect of having to have an active and good bid price for your own home? How much could you get for your own house if you HAD TO SELL and CLOSE in 3 business days? 40% less 50%, 70%.?
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The rest of the message explains the POSITIVE resets to be seen going forward.
http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_M/threadview?m=tm&bn=11232&tid=17562&mid=17562&tof=2&frt=2
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rffrydr
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| Posted: Thu Jan 31, 2008 7:59 am Post subject: |
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Ring in the TOB's
| Quote: | It is also a sign, according to the FT, of forced selling from a little-known but important group of short-term municipal bond investment vehicles - known as “tender option bonds” - that have run into acute stress in recent weeks, based on suspicions about the quality of bond insurers’ guarantees on the paper that they issue.
TOBs have been popular with money market funds - which are required to invest in short-term and highly-rated paper and to maintain the value of every dollar invested. TOB programmes issue securities backed by long-term municipal bond assets, in a market worth about $400bn, according to FT estimates.
Now, amid the growing likelihood that the bond insurers will lose their crucial Aaa ratings, money market investors are selling TOB paper to protect themselves from the risk of downgrades.
At the same time, MBIA is “reeling from an expansion out of municipal securities into guaranteeing CDOs”, notes Bloomberg, “and as the value of some CDOs plummet, ratings companies are pressing the insurers to add more capital”. |
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rffrydr
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rffrydr
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| Posted: Thu Jan 31, 2008 7:28 am Post subject: |
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Thanks for that. I'm surprised that anyone was surprised by the Fitch downgrade
The problem is not as much with the securities (which are their own house of cards) as with the system. Clearly these entities no longer are "above reproach" in the way that is necessary for them to continue. Clearly not their "judges" --who must condemn so that they may save themselves. They need more than money, especially even if they raise it themselves. They need "backing."
Thain says they're not going to get it from the market:
http://www.ft.com/cms/s/0/86f57ea6-cf88-11dc-854a-0000779fd2ac.html
This account from Alphaville live:
| Quote: | Wall Street really didn’t know how to read the 50bps cut by the Fed last night.
NH: Then we had MBIA – one of the big monolines – taking huge writedowns.
NH: And then we had the S&P move – downgrading zillions of mortgage backed securities – or putting them on negative watch.
NH: That carried through to about a zillion CDOs — the next effect being, according to S&P – that bank writedowns for toxic paper will probably double from $135bn to about $265bn.
NH: The banks have only taken collective writedowns of $70bn so far. So that has spooked the market this morning
NH: and also one of the small monolines saw its credit rating downgrade
NH: most of that grim news came aftter the market closed
NH: but surprisingly did not seem to affect asian markets
NH: but it has Europe
NH: spooked the market
PM: SPOOKED!!! |
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HenryTo
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HenryTo
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| Posted: Wed Jan 30, 2008 4:34 pm Post subject: |
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Tom Brown on the Egan Jones' $200 billion number:
http://www.bankstocks.com/article.asp?type=1&id=9881615
| Quote: | That leaves the insurers’ structured finance exposure at $900 billion. Of that, remember that not all insured paper is mortgage-related securities. And remember, too, that of the mortgage-related paper, not all is subprime. Again, no one is looking for a crackup of structured finance paper in general. The problems are with bonds backed by subprime mortgages, Alt-A loans, home equity, and closed-end seconds. The combined par value of that paper that’s backed by the guarantors came to $489 billion at the end of the third quarter, according to BCA Research.
So the guarantors’ subprime truly at-risk exposure is considerably less than $900 billion. And regardless, in the event of default, the subordination—extra collateral—already embedded in the securities will take the first loss. Beyond that, the guarantors will generate some recoveries in foreclosure.
But even if all the subordination in all the securities gets burned through in a heartbeat and recoveries are a pittance, guarantors exposure still won’t be anywhere near $200 billion. Here’s why: when an insured CDO goes into default, the insurer is not obligated to repay its principal immediately. Rather, it simply has to make interest and principal payments over the CDO’s remaining life. In many cases, that could take decades. Between now and then, the insurers’ payouts will consist of relatively modest annual payments spread out over many years. The present value of those payments is a tiny fraction of the face amount of the defaulted securities.
Who knows how much more capital (if any) the guarantors will have to raise? The rating agencies apparently don’t. (They seem to change their minds every week.) But one thing’s for sure: it’s nowhere near $200 billion. I can’t imagine how Egan Jones came up with that number. And I can’t imagine, either, why people can’t see that it’s nutty. |
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rffrydr
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| Posted: Wed Jan 30, 2008 2:24 pm Post subject: |
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Looks like downgrades on the monolines are going to spoil the party.
I would like to have seen something to do with securitization but maybe the cut just lets the banks finance the deal.
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HenryTo
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| Posted: Wed Jan 23, 2008 2:55 pm Post subject: |
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That is great news - it looks like the storm has passed, for now. Here is the WSJ's take on it. My job now is to try to gauge the high amount of subprime resets that are now happening in January and the peak that will hit during March - and to gauge potential impacts, etc.
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| Quote: | New York Meets With Banks
On Stabilizing Bond Insurers
By LAVONNE KUYKENDALL
January 23, 2008 3:48 p.m.
CHICAGO -- Regulators at the New York Insurance Department met Wednesday with banks that are parties to contracts with bond insurers to discuss ways of stabilizing the business and bringing in additional capital and capacity.
Spokesman David Neustadt wouldn't comment on specifics, but the regulator said in a release Tuesday that it is discussing future capital investments in the beleaguered industry.
The department has played an active role in trying to shore up the sector, which guarantees some $2.4 trillion in debt, the bulk of it issued by municipalities that would otherwise have to pay higher rates. The department previously invited Warren Buffett's Berkshire Hathaway to open a new bond insurance company in New York and gave quick approval to a capital-raising plan for top bond insurer MBIA Inc.
Without being specific, the department said more injections of capital are possible.
Shares of MBIA and No. 2 Ambac Financial Group Inc. soared Wednesday, adding to big gains Tuesday. Ambac jumped 63%, and MBIA rose 26%. Each, however, has lost about three-quarters of their value in the past three months.
Investors are concerned the insurers could be hurt by guarantees they have written on complex debt securities and that their key AAA ratings could be downgraded.
Ambac posted a big fourth quarter loss Tuesday amid more than $5 billion in write-downs to its portfolio of credit derivatives. It also said it was considering "strategic alternatives," typically corporate jargon for a sale of the company or the taking on of a major investor.
On Friday, it became the first bond insurer to lose a AAA rating, when Fitch Ratings cut Ambac's rating to AA. |
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rffrydr
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rffrydr
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| Posted: Wed Jan 23, 2008 7:54 am Post subject: |
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Wilbur Ross looking to buy into business. Buffet buys position in Swiss Re last night.
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HenryTo
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| Posted: Tue Jan 22, 2008 8:56 am Post subject: |
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This just crossed the tape:
9:53[ABK] MBIA shares jump 28%
9:53[ABK] Ambac Financial shares surge 38% |
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rffrydr
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| Posted: Mon Jan 21, 2008 1:54 pm Post subject: |
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More on bond insurers noting the BoE is well prepped for such an event.
http://www.hemscott.com/news/comment-archive/item.do?id=42868
It does well to remember that while we were marvelling at the spread junk was trading to in the boom it was also true that there wasn't really any premium to AAA--over, say AA or A, or even BBB. You could say that the ratings were already immaterial in investment decisions so the fall out with Pension Funds and the like won't necessarily be so panic-driven.
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