Thursday, November 8, 2007

A Business I Never Understood-2

"Investors are fast losing confidence that bond insurers, who provide a financial anchor for roughly a trillion dollars in debt, will weather the credit-market storm. ... If a bond insurer's rating slips, it could trigger a domino effect of bond-rating downgrades. ... While the likelihood of insurers being disabled appears remote, 'if their credit ratings were downgraded, then the whole industry would go away', said Ann Rutledge, a principal at R&R Consulting, a structured-credit consulting company. ... Most guarantors insured only CDO securities that had the highest triple-A credit ratings to begin with, and the added protection made the securities more attractive", WSJ, 8 November.

Ann Rutledge (AR) ain't no Janet Tavakoli. Credit guarantees is an industry that should go away. It may be time for AR to start looking for honest work. I understand Citigroup needs a permanent replacement for Chuck Prince (CP). At say $20 million a year, my 35% fee for brokering AR to Citigroup as CP's replacement would be $7 million. I'll work on it.


AR said...

Actually you don't know anything about my work. Ignorance is something that I would not, personally, boast about.

Independent Accountant said...

Good for you. What is your work?

Ann Rutledge said...

Mainly, I train people in the nuts and bolts of structuring and structured bond credit analysis, so they can get as close to the truth of a deal as possible without the need for a rating or a monoline. Occasionally (unfortunately) I help investors figure out what went wrong with their deal after the fact.

Independent Accountant said...

Welcome to the blogosphere, AR, MBA Chicago,'85 from Independent Accountant, MBA Chicago '74. I am never ashamed to admit ignorance. I see you have a website, post. But be warned, it's the wild West out here. You never know when an unknown, out of the blue will dynamite whatever you've said. Hell, we'll attack Hank Paulson, Helicopter Ben, anyone.

I don't know what "the truth of a deal means". I do know that using "arbitrage pricing theory", I concluded most structured finance deals make no sense for anyone except whoever is collecting a fee for putting them together.

As for the monolines, see a post at I refer to. I expect to have more on the monolines later.

Themistocles, Thucydides.
The Pelopnnesian War,
X squared, Y squared,
Who for? What for?
Who we gonna yell for?