RobertB
January 17th, 2008, 09:33 PM
You Should Worry About Ambac
Liz Moyer, 01.17.08, 4:47 PM ET
A growing crisis at Ambac Financial, one of the biggest bond insurers, is raising questions about Wall Street's exposure as counterparties to the bond-insurance industry coming off a period in which the big banks are reeling from more than $100 billion in write-downs of mortgage-related securities.
Late Wednesday, Moody's Investors Service said it might downgrade Ambac's (nyse: ABK - news - people ) all-important triple-A financial-strength credit rating after the company forecast significantly higher-than-expected losses from insuring credit derivatives, many of them tied to subprime mortgages.
Raising the level of alarm a notch, Moody's and Standard & Poor's said they will be evaluating their ratings of other bond insurers.
Bond insurers use their top credit ratings to insure bonds issued by municipalities and others against default. That makes it easier for the issuers to sell the bonds at an attractive rate to institutional investors, like pension funds.
In recent years, Ambac, MBIA (nyse: MBE - news - people ) and others have ventured into insuring credit derivatives and other relatively newfangled fixed-income products invented by and peddled by Wall Street. Ambac guaranteed $38 billion of debt linked to subprime mortgages and has exposure to $45 billion of other mortgage investments.
http://www.forbes.com/home/wallstreet/2008/01/17/ambac-debt-credit-biz-wall-cx_lm_0117ambac.html
Liz Moyer, 01.17.08, 4:47 PM ET
A growing crisis at Ambac Financial, one of the biggest bond insurers, is raising questions about Wall Street's exposure as counterparties to the bond-insurance industry coming off a period in which the big banks are reeling from more than $100 billion in write-downs of mortgage-related securities.
Late Wednesday, Moody's Investors Service said it might downgrade Ambac's (nyse: ABK - news - people ) all-important triple-A financial-strength credit rating after the company forecast significantly higher-than-expected losses from insuring credit derivatives, many of them tied to subprime mortgages.
Raising the level of alarm a notch, Moody's and Standard & Poor's said they will be evaluating their ratings of other bond insurers.
Bond insurers use their top credit ratings to insure bonds issued by municipalities and others against default. That makes it easier for the issuers to sell the bonds at an attractive rate to institutional investors, like pension funds.
In recent years, Ambac, MBIA (nyse: MBE - news - people ) and others have ventured into insuring credit derivatives and other relatively newfangled fixed-income products invented by and peddled by Wall Street. Ambac guaranteed $38 billion of debt linked to subprime mortgages and has exposure to $45 billion of other mortgage investments.
http://www.forbes.com/home/wallstreet/2008/01/17/ambac-debt-credit-biz-wall-cx_lm_0117ambac.html