are the runups in ABK and MBI stock speculative, or is their real long term value to these companies?
I hope they aren't just speculative. I personally think there is substantial value hidden within them, but it will probably take legal action to ultimately reveal it.
In sum, they were defrauded by the banks that purchased financial surety, or managed the asset portfolios into which they threw the premiums that were paid to them. They were defrauded by the Rating's Agencies that over-valued the RMBS, CDOs, and general mortgage debt by which the insurers were required to negotiate their premiums. (sub-prime assets being rated as AAA by Moodys/S&P/Fitch).
Finally, as I mentioned in a previous post, insurers are not legally required to pay claims when insurance fraud is involved. That's why they hire investigators to uncover the frauds and collect the evidence. The monolines are no different. A representative sample of 11,000 originated loans insured by Ambac, fully 80% of them were fraudulently originated.
Why would they want to pay the claim on them if it means they are forced into a "run-off" situation?? If the banks (and the Treasury/Fed) are going to leave the monolines (along with the taxpayers) holding the bag, then it behooves them to sue the banks. ABK has sued JPM over their fraudulent mortgage unit, EMC, and more litigation is to be expected if the policies aren't commuted and/or adjusted.
Thus, I think there truly is some value, but it might take 2-4 years to fully realize it.
Hawk |
