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Bond Insurers Getting Hammered by Credit Default Swaps

Posted By admin On November 7, 2008 @ 5:09 am In Money Watch | Comments Disabled

George Washington’s Blog [1]
Friday, Nov 7, 2008

Why are bond insurers MBIA and Ambac getting hammered?

You guessed it: credit default swaps.

As an article [2] today in Bloomberg puts it:


MBIA and Ambac, previously the world’s two biggest bond insurers, lost their top AAA ratings earlier this year because of potential losses on credit swaps sold to guarantee CDOs [collateralized debt obligations] backed by home loans. Moody’s Investors Service cut New York-based Ambac’s bond insurance rating four levels yesterday to Baa1, three steps above junk, because of potential losses on the derivatives.


MBIA, the Armonk, New York-based insurer crippled by ratings downgrades earlier this year following losses from such contracts, has said it sold $126.3 billion in guarantees on slices of CDOs backed by corporate bonds, mortgages and other debt. Ambac sold $60.7 billion in guarantees on these so-called tranches, mostly through credit swaps, the company said.

Bond Insurers Getting Hammered by Credit Default Swaps 161008pptv1 [3]

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URLs in this post:

[1] George Washington’s Blog : http://georgewashington2.blogspot.com/2008/11/bond-insurers-getting-hammered-by.html

[2] article: http://www.bloomberg.com/apps/news?pid=20601109&sid=aJzpw_m1iC4M&refer=home

[3] Image: http://www.prisonplanet.tv/subscribe.html

[4] How Credit Default Swaps Brought Down the World Economy: http://www.prisonplanet.com/how-credit-default-swaps-brought-down-the-world-economy.html

[5] Government Soaks Up AIG’s Toxic Credit Default Swaps On Our Dime: http://www.prisonplanet.com/government-soaks-up-aigs-toxic-credit-default-swaps-on-our-dime.html

[6] CDO-Related Credit Default Swap Crisis on the Horizon?: http://www.prisonplanet.com/cdo-related-credit-default-swap-crisis-on-the-horizon.html

[7] Stress Tests Prove that Credit Default Swaps Still Pose a Huge Risk to the Economy: http://www.prisonplanet.com/stress-tests-prove-that-credit-default-swaps-still-pose-a-huge-risk-to-the-economy.html

[8] Wall Street Shrinks From Credit Default Swaps Before Rules Hit: http://www.prisonplanet.com/wall-street-shrinks-from-credit-default-swaps-before-rules-hit.html

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