Two owners of ChannelRe, (Partner Re and RenaissanceRe) which provides backup re-insurance to MBIA on $40 billion of bonds, last week wrote the value of their stakes down to zero. We see what SocGen did this morning.
Yesterday, rumors were that NY Insurance commissioner, Eric Dinallo wanted the banks to ante up $15 billion for the monolines in a bailout.
Anyone remember the SIV fund bandied about by Treasury? It started at $100 billion, went to $40 billion, before going to zero.
When the Fed cuts next week, the banks will only have to commit a couple billion to paper away this problem, as the markets heal themselves.
But a $15 billion number sure helped the rally, and caused the shorts to scramble!