![]()
MOST SHARED
- Timeless and Time-Tested Warren Buffett Watch Predictions
- Black Friday Sales Disappoint Investors; Amazon Up
- Governments Must Take Steps To Avoid More Dubais: El-Erian
- Goldman Sachs Party Ban: No Gatherings of 12 or More
- Blue Nile CEO: 'We're Having the Best Cyber Monday Ever'
- Nov. 30: Unusual Volume Leaders
- Get Paid Six Figures to Wear a T-Shirt?
- Oil Demand Sees Year-Over-Year Rise, First Since 2007
- BofA Aims to Clearly Spell Out Credit Card Terms
- Should Homeowners Be Able To Walk Away From Mortgage?
- Lesson From Dubai: Start Cutting Risk In Your Portfolio
- Iranian Seizure of British Yacht Pushes Oil Above $77
- Should Homeowners Be Able to Stop Paying Mortgage?
- Buffett's Predictions For Next Year—And Every Year
- The World's Biggest Debtor Nations
- Goldman Sachs Party Ban: No Gatherings of 12 or More
- Fed Tweaking Plan to Pull Money Back out of Economy
- Scientists Gone Wild: Climate Debate Turns Nasty
- Blue Nile CEO: Having 'Best Cyber Monday Ever'
- We're Approaching a Market Bubble: Portfolio Manager
- Hershey Shares: What Options Are Saying
- Nov. 30: Unusual Volume Leaders
- Why Careful Shoppers Are Great for the Box Office
- Blue Nile CEO: 'We're Having the Best Cyber Monday Ever'
- Best Online Retailers to Buy Now: Internet Analyst
- ESPN The Magazine’s Body Issue: A Financial Success
- Cyber Monday: The Last Vestige of Dotcom Hype
- Dubai Fear is 'Noise'—Stay Fully Invested: Strategist
Bond insurers, whose foray into the subprime debt market has led to billions of dollars in losses, are facing more downgrades of their prized Triple A rating.
![]() |
The growing threat of downgrades, first reported on CNBC late Wednesday afternoon, helped reverse a big stock market rally that was sparked by the Fed's half-point cut in interest rates. Stocks ended up closing lower.
Like other bond insurers, FGIC initially focused on municipal bond deals but ventured into riskier debt securities to boost returns. Massive defaults on U.S. subprime mortgages battered the credit quality of these products, increasing the capital bond insurers needed for an ``AAA'' rating.
Losing a Triple A rating could be devastating for the bond insurers, preventing them from drumming up new clients -- and possibly forcing them out of business.
Ambac has already received a downgrade from rating agency Fitch, but has so far been spared by Standard & Poor's and Moody's. MBIA hasn't been downgraded.
Late Wednesday evening, MBIA announced that private-equity firm Warburg Pincus completed a $500 million investment in the bond insurer, paying $31 a share for stock that has fallen to $13.96 a share since the deal was announced last month.
The company on Wednesday also said Warburg managing directors David Coulter and Kewsong Lee were named to the MBIA board. MBIA said a director Richard Walker, general counsel of Deutsche Bank, resigned to avoid any appearance of potential conflicts of interest in light of ongoing bail-out talks among bond insurers, investment banks and New York state's insurance department.
MBIA will host an investor conference call Thursday morning and may provide some clarity on any proposed bailout or if there are additional private equity infusions on the way. MBIA will only take questions that have been emailed to them beforehand, however.
Meanwhile, William Ackman, a hedge fund manager and short-seller of MBIA, is submitting data to the Securities and Exchange Commission and insurance regulators in New York State alleging that MBIA and Ambac are understating their losses.
In his report, Ackman, of Pershing Square Capital, will contend that both bond insurers have said their mark-to-market losses are less than $1.5 billion, but according to his analysis, the losses for each firm will be around $12 billion.
Ackman has come up with this number through an analysis of the vast majority of the CDOs that have been insured by the company. He will claim that his analysis is conservative, meaning that if there is a question about a particular CDO, he doesn’t assume a worst case scenario.
CNBC has confirmed that Ackman has recently met with investor Wilbur Ross to discuss Ross’ examination of Ambac. Ross is interested in buying one of the troubled insurers rather than starting one of his own.
Sources say Ross may be hesitant to put more than $1 billion into Ambac, so if Ackman is right, it might end Ross' interest in the bond insurer.
Wilbur Ross has declined to comment.
- Reuters contributed to this report.
- Ever wished your cab driver would stop chatting and just get to where you're going? Well, that moment is closer than ever.
- UPS is giving its customers the option to offset its carbon emissions when sending a package.
- Romania's presidential campaign has been rocked by a video that may show the president striking a 10-year-old boy.
- Raising alligators is hard work, and the fickle taste of rich consumers has just made it much harder, says the NY Times.
- A recent issue of ESPN Magazine was one of its top sellers ever, and it only took scantily clad athletes to make it happen.
- The continued real estate boom in China is partially fueled by a generational flood of newlyweds.













