Monday, February 18, 2008

Fraudulent conveyance?

Feb. 18 (Bloomberg) -- Regulators' plans to break up bond insurers into "good'' businesses covering municipal debt and "bad'' businesses liable to subprime-related losses may trigger "years of litigation,'' Bank of America Corp. analysts said..

"It is the equivalent of going to a casino and trying to keep only the winning bets,'' said Tim Mercer, chief investment officer at Hong Kong-based hedge fund Musashi Capital Ltd. "This would be a straightforward case of fraudulent conveyance and everyone involved would be liable for damages from deprived creditors.''
More here:

I am not a lawyer but the proposal to split up Ambac looks like Fraudulent Conveyance. A fraudulent conveyance, also fraudulent transfer is a civil cause of action. It arises in debtor/creditor relations, particularly with reference to insolvent debtors. The cause of action is typically brought by creditors or by bankruptcy trustees. The usual fact situation involves a debtor who donates his assets, usually to an "insider", and leaves himself nothing to pay his creditors as part of an asset protection scheme.

It's the credit default spreads that the investment banks have with the monolines, that they so desperately want to protect. And with Buffett in the background, "arguing" that his plan "saves" the municipals is just nonsense. Who needs to pay to save that which doesn't need saving?

But the action in the European stock markets today, shows that Trichet's comments about credit, and the Central banks "alertness" are being heeded by stock investors.

And now, the markets are heading up.

A month ago, on the MLK holiday, SocGen was blowing $7.3 billion by "being prudent" and liquidating $73 billion of futures. Talk about taking a loss you didn't have to take!

A huge loss for being "prudent." So when you hear the bears telling you not to step in at these prices, don't listen to them.

They're not being prudent; they are being reckless!

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