Sunday, April 5, 2009
MBIA = AIG, Maybe Not
"Representatives of about 15 financial institutions will meet Thursday with New York State Insurance Superintendent Eric Dinallo [ED] to complain about MBIA Inc.'s decision to split its bond-insurance unit into two companies, people familiar with the matter said. The group includes many banks that feel disadvantaged by MBIA's move last month to separate its municipal-bond business from its commitments to insure mortgage-backed bonds and other structured securities. The banks are counterparties to MBIA on derivatives called credit-default swaps that were written on securities they own, many of which have deteriorated since the onset of the credit crisis. MBIA and New York State's insurance regulator--which endorsed the restructuring--are facing a growing backlash from banks, investment funds and other policyholders. ... On Wednesday, a group of hedge funds sought class-action status for a lawsuit against MBIA and the two operating units. ... In the lawsuit, filed in a New York federal court, the funds said MBIA's restructuring 'was nothing short of a looting' of MBIA Insurance Corp., the firm's main operating unit. The funds are asking the court to reverse MBIA's plan", my emphasis, Serena Ng and Lavonne Kukendall at the WSJ, 12 March 2009.
These must be the last days. I agree with the banks. We see a fraudulent transfer in process, approved by ED. Compare MBIA's situation to AIG's, where ED approved a $20 billion bailout of the AIG parent to protect the banks. Looting indeed. ED, why did you let AIG loot its insurance subsidiaries in September?