[Travis McGee]

However, when it comes to working out the impact on banks, the task becomes even harder. For in recent years, banks have not simply been acquiring subprime loans, they have been repackaging them into complex "asset-backed securities" (ABS) that can be difficult to value.

Have you heard the new slang term for these "asset backed securities?"

Ass-paper.

I kid you not.

[Southack]

It’s easier to sell unsecured notes backed by borrowers with good credit ratings right now than to sell asset-backed-securities (e.g. mortgages that can foreclose on actual properties like houses and office complexes)...which is a pretty good indication that we are in the final flushing-out stage (which involves heavy liquidations).

By the end of next year real estate will be stable or rising, however.

[Professional]

AMBAC and MBIA primarly in the biz of insuring municipal bonds. Apparently though, they forgot what their M’s stood for, got in the business of insuring some of this ass paper. Look at the ticker symbols of ABK and MBI. Cratering....

Worse yet, those are the two dominant players of municipal insurance, and their stocks and debt are falling like a rock. If munis trade without the implied insurance backing of these two, then the muni market could take a big hit, run into some panic sell downs. You realize how much money they are supposed to be insuring??? I’m sure it is well over a trillion dollars or more, and their collective mkt caps now are about 5b, down from 20-30b just a few months ago.