Friday, February 15, 2008

Monoline Bailout

"At a time when most investors would be counting their winnings, William Ackman, head of hedge fund Pershing Square Capital Management LP, is ramping up his high-profile campaign against bond insurers, even as news swirls that a possible bailout is in the works for the insurers. Mr. Ackman, who has been criticizing the bond insurers for five years, says he still has a multibillion-dollar wager against them, including credit-default swaps he used to bet specifically against MBIA Inc. shares in 2002. ... In recent weeks, ratings agencies have started to come around to his argument that the bond insurers have flawed risk-management practices that have left them with significant shortfalls in capital. ... He characterized the bailout as an attempt by banks to 'arbitrage' the stringent capital requirements of federal bank regulators with what he says are the less-stringent requirements of the ratings agencies, which oversee the bond insurers. ... 'But if the bailout is a mechanism for the banks to continue to hide losses off balance sheet, then we think it's very bad for the capital markets'," Karen Richardson (KR) at the WSJ, 2 February 2008.

Bravo KR. Go Ackman go. Also see my 20 December 2007 post.

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