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Post by jeffolie on Dec 20, 2007 17:10:11 GMT -6
Fitch Places 173,022 Issues on Rating Watch Negative Press Release: Fitch Places 173,022 MBIA-Insured Issues on Rating Watch Negative (hat tip Mike) Concurrent with its related rating announcement earlier today on MBIA Inc. (MBIA) and its financial guaranty subsidiaries, Fitch Ratings has placed 173,022 bond issues (172,860 municipal, 162 non-municipal) insured by MBIA on Rating Watch Negative. Only 173,022 issues. Ho-hum. calculatedrisk.blogspot.com/
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Post by jeffolie on Dec 20, 2007 17:18:57 GMT -6
With the cut in the rating for the insurer, the municipal bonds guaranteed by ACA also lose their top ratings. Lower ratings means issuers must pay higher interest on the bonds. National analysts said the downgrade could lead to a borrowing crisis for some local governments, who could see higher costs when trying to finance projects. biz.yahoo.com/ap/071219/fl_bond_ratings_florida.html?.v=1
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Post by jeffolie on Dec 20, 2007 17:45:00 GMT -6
MBIA faces similar threats, as a bond insurer. They have faced a likely downgrade by Moodys for weeks, sure to put in grave doubt the status of $652 billion of structured finance bonds, as well as state and municipal bonds that they insure. The world’s largest bond insurer, MBIA beat the market to the punch in surprising admission of having $8.1 billion in CDO bond exposure. They also opened the door to discussion of ‘CDO Squared’ derivatives, which are leveraged instruments built recklessly atop other leveraged mortgage bonds securities. Expect the MBIA actual losses will ultimately be three to five times larger. MBIA, ACA Capital, and six other bond insurers sweat bullets over debt rating agency downgrades. A loss of their top rating would cast serious doubt on $2400 billion in asset backed debt securities collectively. The ripple effects to the bank/bond system will reverberate for weeks, if not months. In fact, my expectation is that successive ripples in 2008 will be larger than all previous. The disaster that befalls ACA Capital will serve as the first true tough test of credit default swaps, those insurance contracts for corporate bonds and mortgage bonds. In June, the value of bonds linked to credit default swaps rose to a staggering $42.6 trillion, up from only $6.4 trillion at yearend 2004. These figures are supplied by the Bank for International Settlements in Switzerland. A melt-up precedes a melt-down. My contention is that the entire US financial engineering contraption is being dissolved, a crumbling pile of wreckage, with evidence of fraud throughout the structure. The threat to the entire banking system has never been this great since the Great Depression. If the USGovt fails to bail out the bond insurers, expect a monumental flood of well north of $300 billion in bond losses, extending to the municipals. Communities will not be able to continue, and will announce layoffs. It will not just be a California story. The most tragic, but absurd, yet hilarious, observation is that the investment community has yet to conclude that the US bank/bond system is officially bankrupt, broken, insolvent, and wrecked beyond repair!!! www.financialsense.com/fsu/editorials/willie/2007/1220.html
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