Bye-bye Tinky-winky.
Bye-bye Dipsy.
Bye-bye Laa-laa.
Bye-bye Po.
The sun is setting in the sky, Teletubbies say good-bye.
Posted on 02/14/2008 2:48:01 PM PST by TigerLikesRooster
Monolines given five days to find funds
By Aline Van Duyn in Washington and Michael Mackenzie in New York
Published: February 14 2008 14:54 | Last updated: February 14 2008 21:47
Eliot Spitzer, New York governor, on Thursday gave bond insurers three to five business days to find fresh capital, or face a potential break-up by state regulators who want to safeguard the municipal bond markets.
Mr Spitzer’s warning came shortly before Moody’s Investors Service highlighted the concerns about the bond insurers by withdrawing its triple-A credit rating for privately held Financial Guaranty Insurance Company.
However, the sting of Moody’s downgrade was mitigated by its more positive comments about MBIA and Ambac, the two largest bond insurers, which were up 8.4 per cent and 12.4 per cent respectively in New York.
If the bond insurers lose their triple-A credit rating, the bonds and other instruments they insure also would be downgraded. This could trigger more writedowns for banks and other investors that hold such investments and a sharp rise in borrowing costs for local government entities that issue insured bonds.
Mr Spitzer told the House financial services subcommittee on capital markets in Washington that he believed the crisis involving the credit insurers needed to be resolved in three to five business days.
He did not specify what steps insurance regulators, who operate at the state rather than federal level, could take. But they have powers to protect policyholders – and the policyholders for bond insurers include municipalities that rely on their guarantees, as well as banks.
The tough tone was echoed by Eric Dinallo, New York’s insurance superintendent, who was appointed by Mr Spitzer and who has been pushing for bond insurers and the banks most exposed to them to discuss new sources of capital. He said his first priority would be to protect the municipal bondholders and issuers.
Mr Dinallo said the regulator would allow bond insurers to split into two companies. One would have the municipal bond policies and other healthy parts of the business, the other would have the structured finance and problem parts. Warren Buffett, the billionaire investor, has offered to take over the municipal portfolios of Ambac, MBIA and FGIC. One has already rejected the offer.
Mr Dinallo said he was considering rewriting the rules for bond insurance to prevent companies taking inappropriate risks.
A break-up of the bond insurer model holds grave implications for financial institutions that face writedowns on insurance and derivatives contracts entered into with bond insurers.
The concerns about the credit insurers have been heightened by the collapse in confidence in the $330bn auction-rate securities market, which is used by many US municipalities to raise money. Worries about the insurance for these securities has pushed up borrowing costs significantly for issuers including the Port Authority of New York & New Jersey.
Ping!
destroying value before your very eyes.
I daresay they'd be more at home in Putin's regime.
These guys are like cops with machine guns. "Counterproductive" is the understatement of the year. Are their malpractice penalties for "public servants?"
Elliot Spitzer is the governor from hell.
The monolines are insolvent, overlevered at least 100:1, and the illusion that the insurance they have sold has any validity is pure fiction. Everybody knows this, and every money center banker is praying for some kind of government bailout so that you and I can pay for their mistakes. If you’re saying that the continuation of that fiction is good for the market, then you’re saying that 5+ years of slowly bleeding liquidity is a good thing. I’m not in favor of it, myself. There’s no question that the marking to market of these companies’ liabilities will produce disruption, but so would the breakup of the Gambino family. There is no way out of the current real estate, stock market, and bond market situations until the companies engaged in the massive fraud are compelled to generate proper accountings for their earnings and liabilities.
This is very dangerous. I do not think that these “regulators” know what they are doing. 5 days in not sufficient time to come up with a solution that does not destroy a lot of healthy items on the balance sheet. They could trigger a financial melt down.
How much is "healthy" now?
Yes, that is the $64,000 Question (or is it the $64 trillion Question?)
“There’s no question that the marking to market of these companies’ liabilities will produce disruption”
That qualifies as the understatement of the 21st century. Forcing the monolines to the wall will lead step by step to Great Depression #2. I hope someone clever can come up with a better idea. The fact that the fate of our economic system rests in the incapable hands of Elliot Spitzer gives me a cold chill.
I have little or no argument with you as to how very serious this whole thing is and Spitzerizing them is guaranteed to produce a SHTF moment. But what is the alternative? The execs walk away with tens or hundreds of millions, the losses get socialized onto the taxpayer by yet another new government agency designed to mask hundreds of bilions in losses, and the SEC is shown to be toothless and completely on the side of listed companies. Until then, credit markets are essentially frozen. The result is going to be a massive INCREASE, yes increase in interest rates and it is going to whack the economy good. I see no escape. Now or later, that’s the choice.
Depend on Eliot Spitzer to be the bull to run into the China shop.
There is already sand in the box of spinning gears. It may grind to a halt, or not. But what Spitzer is doing is tossing a big wrench among the gears. His “Five days! Look at me!” is grandstanding, a classic bull in a china shop.
One bit of good that might come of it: if this grandstanding leads to a meltdown of cascading cross-defaults, we’ll be able to blame it on Spitzer. Even if it was bound to happen anyway, later rather than sooner.
Is Spitzer a RINO?
the businesses don't need to be strongarmed by some insecure panzy on a power trip and his gay lover in order to do what makes sense for their balance sheets.
I'm guessing from your schpiel that you're not really digging much deeper than the headlines in the popular press nor your own prejudices.
Heck no, he’s a hard core ‘rat. But he made his name moving vague goal lines, and going after wall street execs who he redefined into crimes.
So he probably thinks he’s returning to his glory days, here, and finally moving beyond Troopergate.
btt
Bye-bye Tinky-winky.
Bye-bye Dipsy.
Bye-bye Laa-laa.
Bye-bye Po.
The sun is setting in the sky, Teletubbies say good-bye.
Perfect!
That measn it will surely happen on Bush's watch. Nobody will remember - or at least the MSM and Democrats won't point it out - it is Spitzer who threw the bomb which sunk the boat. The GOP will take the blame (not that they don't deserve some...).
I guess they can continue to rearrange the deck chairs, but the music plays on and the water is rising.
“The GOP will take the blame”
I’m afraid you are quite correct!
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.