Posted on 07/05/2015 11:55:20 AM PDT by Lorianne
I really had not been paying much attention to the Puerto Rico debt situation. After all, $72 billion in debt that might go bad – big deal. The Fed can print up $72 billion in credit lines with the push of a button.
But a friend of mine happened to mention to me today (Monday) that MBIA’s stock was down over 23% and Assured Guaranty’s stock was down over 13%. That woke me up.
Companies like MBI and AMBAC underwrite credit “enhancement” guarantees on these massive cesspools of debt – and the associated derivatives that are “wrapped around” the debt structures – and stick them in VIEs. MBI’s 10-K has several pages of footnotes which vaguely describe the contents of its VIEs. The problem is that MBI and its ilk are thinly capitalized relative to the potential size of the liabilities they face if the credit markets become volatile to the downside.
But wait, the story gets even better. As it turns out Warburg Pincus, one of the loftiest private equity firms on Wall Street, is by far MBI’s largest shareholder. Warburg announced a little over five weeks ago that it was going to unload 60% of its stake via over the counter negotiated sales – LINK. The firm has been unloading these shares since May 18th. We won’t know how successful this effort has been until the selling is completed.
Does Warburg Pincus sound recently familiar? It’s the firm that hired “Turbo Tax” Tim Geithner shortly after he left his post as Treasury Secretary. Remember, Geithner was head of the NY Fed at the time of the 2008 financial collapse. In other words, he knows where a lot of the bodies in the financial system are buried. I have no doubt that Geithner has played a significant role in advising Warburg on the need to unload its exposure to MBIA. Anyone who takes the other side of this trade is a complete idiot.
You want it to be Wall Street versus Main Street? It sounds like you have read heavily from the Demoncrap playbook.
I don’t want it to be that way. I’m just saying that it is that way. I’m a self-employed small business guy. I pay my taxes. I don’t get any bailouts. Wall Street, on the other hand, gets huge bailouts from the taxes I pay. That’s unacceptable. I really don’t care what Wall Street types do - it’s all fine with me. I just object to being taxed to cover their bad bets.
Not all of Wall Street gets/got bailouts. Only some banks received bailouts and some were pressured into accepting the bailouts (they were loans). Not all companies received bailouts (my company wasn’t eligible and didn’t need them anyway).
Great. We should be okay then.
.
We’ve been here before, not too long ago.
PMI was the same game.
This is just the same ol’ depression, bouncing on down the road.
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