MBIA

  • 12 May 2008 at 3:15 PM

Update: Charlie Gasparino’s (Stomach Has) Got Something To Say

By

Sooo. Moments after we announced our latest market moving experiment, inspired by the stomach rumblings of Charlie Gasparino, C to the G called us to “set the record straight.” Gasparino, who seemed a bit perturbed at Barron’s writer Jonathan Laing’s suggestion that he’d been fed the “Ambac or MBIA will be downgraded” story by Bill Ackman, told us: “A lot of journalists take shots at people without calling them first. This guy lacks the integrity to call me first and at least find out if something is right or wrong. He failed Journalism 101.” Prepared, network-approved comments aside, however, we’ve heard that Gasparino put it slightly less lightly to friends, saying: “This guy didn’t have the balls or the brains to call me. If he had half a brain or half a testicle, he would have at least dialed me up before I fly out to Chicago and dial him up. I hope he sleeps well tonight.” When asked to confirm that the harsher, mildly more litigious words had exited his mouth, CG only offered “no comment.” You do the math. (And: start doing something with that Bear news I mentioned. Time’s running out!)

  • 12 May 2008 at 2:28 PM

Breaking News From Charlie Gasparino By Way Of The Nitrates Acting Up In His Stomach

By

Barron’s has an article today about how even though no one knows anything about credit-default swaps, few people can resist speculating, the analysts in Charlie Gasparino’s lower abdomen included. Around 3 pm on January 30th the CNBC on-air editor said he “felt in his gut” that Ambac or MBIA or both would be downgraded. Nothing happened, but shares of both companies plummeted on the news. That’s right people—the gastrointestinal discomforts of Charlie Gasparino, who we’re told was seen wolfing down an Italian sub with rapidity that would distress even the steeliest of bellies, are now causing turmoil in the markets. So ridiculous we wish we could take credit for making it up. Damn you, Charlie Gasparino, for subconsciously ginning things up in response to our obsessive chronicling of your every Dago-esque utterance. It’s almost as though you want to make it impossible for us to parody you. Attributing insider information to the sources in your stomach is something WE do, not you.
Anyway. We can’t be too hard on Gasparino’s prognostication skills because, truth be told, who cares about being right or wrong when you’ve got that kind of power? Though we could never hope to match his market moving ability, we have decided to perform a small experiment of our own, just to see how we match up. Here’s the rub: we had some bad Chinese last night and are starting to feel violently ill. That’s got to mean something, no? At random points throughout the day, we’re going to pin the feelings of nausea waving over us to a little piece of news that we know isn’t true, and see what happens. Starting now: We feel in the pit in our stomach that Bear Stearns is going to pre-announce record earnings on the strength of its subprime mortgage funds. Make of that what you will.
Credit-Default Swaps: Weapons of Mass Speculation [Barron's]

Is Muni Bond Insurance A Racket?
The Portfolio Gang Responds!

By

Although it looks like MBIA is now out of the woods, rival bond insurer Ambac’s fate is still murky. Reports indicate that the ratings agencies are now considering the rescue plan worked out by banks and state insurance regulators. The plan may be revealed as early as this week, and will probably involve splitting Ambac in two to segregate the municipal bond insurance business from the less healthy business of insuring riskier credit products.
Last week Holman Jenkins pointed out that segregation is unfair to customers who bought insurance on CDOs because it would “retroactively award municipal clients privileged status at the expense of other clients with equal claim on the insurers.” Bill Ackman, who has been shorting the bond insurers for years, raised a similar point. Indeed, Jenkins expects that the policy holders left with guarantees from the suddenly even more precarious side of the business will launch lawsuits to prevent the break-up.
There’s also a much stranger objection to the segregation plan, one stemming from an objection to the very existence of municipal bond insurance. We first heard about it in Portfolio, of all places. In the latest issue Jesse Eisinger argues that municipal bond insurance is a scam, and it’s victims are municipal governments. This will no doubt come as a surprise to state regulators and treasuries who have been on knife’s edge fearing that the collapse of the bond insurers would make raising money costlier or, in some cases, perhaps impossible. If the governments are the victims here, why exactly are they working to keep the victimization going?

Continue reading »

Bond Insurer Split: Worst Possible Outcome For Wall Street

By

When he first approached Wall Street to explore plans to rescue bond insurers, New York state’s top insurance regulator Eric Dinallo warned top bankers that they had helped create the mess and that they were facing serious losses if something weren’t done. After weeks of negotiations with an assortment of senior Wall Street bankers failed to produce a consensus on a bailout, it now seems as if Dinallo might push ahead with a plan that could trigger another round of record breaking losses for Wall Street firms.
Dinallo has proposed splitting the companies municipal insurance businesses from the businesses guaranteeing collateralized debt instruments that have suffered under the subprime meltdown. Credit ratings on more than $580 billion of asset-backed securities may be cut, according to Bloomberg. There are estimates that that could trigger write-downs of up to $35 billion. Citigroup and Merrill Lynch are often cited as having the largest exposure to the risk of an insurer downgrade.
“This is one of the worst possible outcomes for the market,” Gregory Peters, head of credit strategy at Morgan Stanley in New York, tells Bloomberg. And by “the market” he means Wall Street.
FGIC has already asked regulators for permission. MBIA has ousted its chief and replaced him with former chief executive Joseph Brown. He’s indicated that he will also seek to split the muni business from the CDO business.
Bond Insurer Split Threatens $580 Billion of Notes [Bloomberg]