Monday, December 17, 2007

Junkyard Dogs at the Table

"First came the bankers who created funky mortgage investments. Now come the lawyers. ... On Nov. 6, Sagittarius triggered 'an event of default.' This prompted MBIA to claim it should get all the remaining payments. That put it into potential conflict with Deutsche, the CDO's trustee, and UBS, an investor with fewer rights in the event of a default. Sorting out how to value the assets, who gets paid and whether to pull the plug on struggling CDOs is complicated business. ... So far, three CDOs have started the process of liquidation. ... MBIA has reason to aggressively protect its interests--its stock has declined more than 60% this year amid concerns about its mortgage exposure. ... 'No one has cracked the code on how these things work out and divy things up,' says Julia Whitehead, a senior adviser at valuation advisory firm Miller Mathis", Aaron Lucchetti at the WSJ, 17 December.

Each day the market presents new opportunities. Here's one for New York's R&R Consulting. It, Miller Mathis and a third financial engineering firm can offer three-person arbitrations to decide who gets what. As Rhett Butler said in Gone With the Wind, 1939, "There's just as much money to be made in the wreck of a civilization as in the upbuilding of one".

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