Thursday, August 28, 2008

MBIA has 81 million shorts and not one expected this!

Aug. 28 (Bloomberg) -- MBIA Inc. rose in Europe after the company agreed to reinsure $184 billion in municipal bonds for Financial Guaranty Insurance Co., winning new business after losing its top AAA rating...

``MBIA wouldn't do the deal unless they thought they were going to make money,'' said Timothy Graham, who helped Bermuda- based reinsurer LaSalle Re Ltd. avoid insolvency as its chief restructuring officer. ``So, they probably got a pretty good deal.''

MBIA, which slid 79 percent in New York in the past 12 months, is showing it can survive without the top AAA rating. The company is facing competition from the new insurance unit of Warren Buffett's Berkshire Hathaway Inc. as well as Assured Guaranty Ltd. and Financial Security Assurance Inc. MBIA led bond insurers posting record losses after straying from the business of backing municipal bonds to guaranteeing collateralized debt obligations that have tumbled in value.

MBIA agreed on Wednesday to take control of nearly $200 billion of municipal bonds currently backed by a rival bond insurer, the FGIC Corporation, in a move that could help its competitor avoid bankruptcy.

The agreement between the two companies calls for the municipal bond issuers to pay their premiums in advance, transferring $741 million to MBIA. In exchange, MBIA will pay FGIC a commission worth nearly $200 million.

In February, Warren E. Buffett, the billionaire investor, said he had offered to reinsure some $800 billion worth of municipal bonds guaranteed by MBIA, Ambac Financial and FGIC. His investment vehicle, Berkshire Hathaway, proposed that it would invest up to $5 billion as capital.

However, all three insurers rejected the plan.

So MBI was not supposed to get any new business? I guess this transaction wasn't in the shorts models!


bob said...

oh my...

CFTC inspector starts probe into oil report: paper Thu Aug 28, 1:55 AM ET

(Reuters) - The Inspector General for the U.S. commodity-futures regulator has officially begun an investigation into an inter-agency report on commodity markets, the Wall Street Journal said citing a person close to the matter.

Earlier in the month four U.S. senators had sent a letter to Inspector General Roy Lavik questioning the Commodity Futures Trading Commission's role in an inter-agency task force interim report that said "supply and demand factors" were responsible for the surge in fuel prices.

The interim task-force report, which came out just days ahead of a Senate vote on the bill, said skyrocketing energy prices were the result of supply-and-demand fundamentals and not speculation.

The senators, including senior members of the Energy and Natural Resources Committee, allege that the CFTC knowingly included "seriously flawed" data and the timing was "suspicious."

The Inspector General was taking the issue "very seriously" and was conducting interviews in a number of CFTC offices, the paper said citing a person close to the matter.

No one at CFTC was immediately available for comment.

(Reporting by Sweta Singh in Bangalore; Editing by Greg Mahlich)

Palmoni said...

Wow Another great find!