Stockman Scott's Political Debate Porch Message Board

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Politics : Stockman Scott's Political Debate Porch

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To: Jim Willie CB who wrote (2672)	7/19/2002 5:11:56 PM
From: stockman_scott	Read Replies (1) of 89467

MBIA -- another LTCM...?? Message 17763095 <<...Abstract: MBIA is the LTCM that is about to set off the powderkeg of a global financial market we have. They are effectively sporting a "debt" to equity ratio in the triple digits, and apparently occupy a blind spot in the financial regulatory picture. They insure over $400B par value of bonds, and $720B total value, on - get this - a mere $4B equity! All it would take is one major bankruptcy of an insured party, and they're under. The ramifications of an MBI bankruptcy are non-obvious, but enormous. Instantly, the triple-A financial rating of $440B par value of bonds vanishes. Hundreds of billions of dollars in debt is exposed as the junk that it is, which results in the forced liquidation of a huge portion of that by parties that are not permitted or are not comfortable holding junk. You think the billions lost on Worldcom bonds was bad? You ain't seen nuttin' yet. Instant junk bond chaos. Liquidity vaporized. No more asset-backed securities market. All it would take is one $4B knock - and it may have already happened in WCOM...>>

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