Saturday, March 7, 2009
Mortgage Insurance, RIP
"Bond insurer MBIA Inc., in an attempt to salvage what is left of its business, is separating its troubled mortgage exposure from its U.S. municipal-bond insurance portfolio. Insurance regulators touted the move, announced Wednesday, as the only way for the nation's largest insurer of municipal bonds to restart its underwriting business for new debt, which stalled over the past year in investor concerns about the company's long-term solvency. ... The move divides its muncipal-bond insurer from the business that guaranteed 'structure-finance' securities, including the subprime mortgage-backed bonds and [CDOs] whose performance has deteriorated with the housing downturn. ... MBIA's move to ring-fence its relatively good positions from questionable ones dovetails with thinking on Wall Street and in Washington that segregating assets may be the best way to revive the financial system. ... [S&P] cut MBIA Insurance Corp.'s credit rating five notches to triple-B plus", Serena Ng at the WSJ, 19 February 2009.
This looks like a zero-sum game to me. Who was hurt by it? Anyone holding guaranteed CDOs and such.