"A group of 18 financial institutions sued MBIA Inc., claiming the bond issuer's decision to split its businesses earlier this year was fraudulent and left one of the units effectively 'insolvent.' The lawsuit, filed in New York state court, was brought by US and foreign banks, including JP Morgan Chase & Co., Bank of America Corp., Morgan Stanley, Canadian Imperial Bank of Commerce, Barclays PLC and UBS AG. ... MBIA in February separated its troubled mortgage exposures from its profitable US municipal-bond insurance portfolio in an attempt to resume writing guarantees on municipal debt. The original MBIA Insurance unit was left with $10 billion in claims-paying resources to back guarantees on about $240 billion in structured-finance securities and non-US bonds, and its rating was downgraded to 'junk' by credit-rating agencies. ... Many of the banks had bought credit derivatives from MBIA that insured them against losses on securities backed by subprime mortgage assets and commerical real-estate loans. ... In mid-March, representatives of about 15 financial institutions complained to New York State Insurance Superintendent Eric Dinallo [ED], who had approved MBIA's split. ... 'Our lawsuit simply seeks to ensure that policy holders receive what they have paid premiums for: contractually guaranteed insurance protection,' said Vince DiBlasi, a lawyer at Sullivan & Cromwell [S&C], who is representing the banks suing MBIA. ... MBIA and insurance regulators have said their internal projections and estimates of future losses indicate the original insurance unit remains solvent", my emphasis, Serena Ng at the WSJ, 14 May 2009.
MBIA's split is an obvious fraudulent conveyance. How can Haines miss this? I agree with the banks here. Let MBIA file bankruptcy. Now. See my 30 April 2009 post, link: http://skepticaltexascpa.blogspot.com/2009/04/mbia-split-attacked.html.
Let's look at some numbers. At 31 December 2008 MBIA had $994 million in book equity, $233 and $554 billion in insurance in force on structured finance products and municipal bonds respectively. I looked at MBIA's financials, PWC, the guys who "audit" AIG and GSG, had no problem with MBIA's numbers for $4.6 million in fees. MBIA's financials are laughable as is PWC's opinion. I wouldn't pay $1.26 billion for MBIA at its current $6.06 per share price. MBIA should be sent to sleep with the fish. I wish the banks, yes the banks, well with their suit. If they win, they may teach ED a badly needed lesson. What did ED know and when did he know it? Well PWC, where do you stand on this, my 13 May 2009 post, link: http://skepticaltexascpa.blogspot.com/2009/05/pricewatergates-waterloo.html.