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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: LTK007 who wrote (99587)11/10/2008 3:39:06 PM
From: Hawkmoon  Read Replies (2) of 110194
 
Let's see.. $250 Billion given to banks who originated, packaged, and then in collusion with fraudulent ratings by Moody's, S&P, and Fitch, committed insurance fraud by misrepresenting the value of their assets, and folks are complaining about giving $140 Billion to AIG?

Normally I'm not a big fan of insurers since I think they charge exorbinant rates. But in the case of the mortgage and financial insurers, I'm starting to understand who the corporate victims are in all of this.

The one bit of leverage that monolines have is that they demanded the voting rights to many of these CDOs, making it nearly impossible for the banks to sell them without resolving their insurance agreements.

ABK just reported the other day, when they announced their lawsuit against a former Bearn-Stearns subsidiar (EMC) now owned by JPM, that 80% of nearly 600 defaulted loans had been originated under fraudulent pretense. Thus, obviously by asserting fraud, they are looking to the courts to make good their losses, or to tear up the counter-party CDS's on favorable terms to the insurers.

But one other thing to think about. What good is all that money the Fed gave to the banks going to do if there isn't a functioning risk mitigation industry (namely financial surety and re-insurance)? The AIG bailout is hopefully the first step in regaining some measure of confidence in the financial insurance markets.

And how are municipalities going to tap the muni markets if they are not able to obtain insurance on their bonds? Does anyone really want to trust a municipality facing declining property tax revenues?

Hawk
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