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Strategies & Market Trends : Classic TA Workplace
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To: NOW who wrote (61418)12/13/2002 8:49:51 AM
From: Perspective  Read Replies (3) of 209892
 
Read every page of that Gotham MBI report, and they confirmed all my suspicions. If the information is correct, MBI has repeatedly lowered its standards from the old "no-loss" days of yore. Some of it is so sad, I don't know whether to laugh or be angry since it is at the root of the consumer and corporate finance bubbles. They've morphed from insuring general obligation bonds backed fully by taxpayers to special municipal bonds backed only by specific revenue streams to securitized home equity loan portfolios to subprime auto and credit card debt to credit default insurance. At every turn, they've accepted increasing risk without any appreciation for the vast increases in risk to their corporation and the stability of the global financial system.

They claim to hold high quality collateral in their portfolio, but it's only AAA because - you guessed it - it's insured by MBIA! Can't the ratings agencies see that kind of circular logic makes no sense? Their off-balance sheet debt will be coming on balance sheet, and it sounds like low quality.

Got a few probes out for verification purposes. I'm still interested to see how the credit agencies respond to this. Unfortunately they make a lot of money from the scam so I doubt their objectivity. Of course, I doubt Gotham's as well, but there just aren't that many Gotham's out there, so somebody has to do it. We can't expose *all* the scams all by ourselves.

MBI's response so far is a non-response. They didn't address anything or give any specifics, just broad denial.

I think our best hope is the regulators. Big question is whether they're on the take as well.

BC
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