Posted on 06/20/2008 11:31:12 PM PDT by TigerLikesRooster
Bond Insurers Inflict Further Pain on the Market
By Liz Rappaport and Serena Ng
The long-anticipated credit-rating downgrades of the nation's big bond insurers are pressuring financial markets, perhaps worse than expected.
On Thursday afternoon, MBIA Inc. and Ambac Financial Group Inc., which together guarantee more than $1 trillion in debt, lost their triple-A financial-strength ratings from Moody's Investors Service.
Moody's, which lowered MBIA's rating by five notches and Ambac's by three, was the last of the three major rating firms to cut those ratings. Fitch Ratings and Standard & Poor's did so earlier this year.
(Excerpt) Read more at online.wsj.com ...
Ping!
If the insurers are rated at less than AAA, none of the bonds they insure can be AAA.
This leads to a lowering of the rating of all bonds they insure.
All mutual funds whose prospectus limits them to only AAA bonds will have to sell them.
Is this scenario correct?
yitbos
Bond holders can insure with a new company to preserve their AAA rating.
I think the price of AAA bond insurance just went up.
Who are the AAAs. Seems like they would be a good investment. Until, Moody's gets around to re-rating them, too.
yitbos
This doesn’t sound good to me. Will further bring down the economy. I see a domino effect starting. First the mortgage market, next the credit card market, the bond ratings take a dive, oil prices and food prices rise, the Fed may raise interest rates because of inflation due to the high oil prices, what’s next?
President Obama.
What new company?
And four years after that (if not sooner!), we have a massive voter revolt as people realize President Obama is President Carter all over again (only worse!) and will elect a President and Congress that will finally enact massive reforms to get our economy back on track—starting with the biggest overhaul in our tax system since the 16th Amendment was passed.
Not in the good ol’ U.S. of A. We’re “special”. We can spend ourselves into oblivion, spread Empire (and our job base) around the world, develop huge popcorn fart-based financial markets, and nothing but sunshine and roses will come of it.
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