From the NY Times:
Next on the Worry List: Shaky Insurers of Bonds
Even as stocks ended five days of losses with a surprising recovery on Wednesday, officials began moving to defuse another potential time bomb in the markets: the weakened condition of two large insurance companies that have guaranteed buyers against losses on more than $1 trillion of bonds.
Regulators fear a possible chain of events in which the troubled bond insurers, MBIA and Ambac, might be unable to keep their promise to pay investors if borrowers default on their debt.
That could leave the buyers of the bonds — including many banks and pension funds — on the hook for untold billions of dollars in losses, shaking confidence in the financial system.
To avoid a possible crisis, insurance regulators met with representatives of about a dozen banks on Wednesday to discuss ways to shore up the insurers by injecting fresh capital, much as Wall Street firms have turned to outside investors recently after suffering steep losses related to subprime mortgages.
While it is unclear what steps, if any, the banks and regulators may ultimately take, the talks focused on raising as much as $15 billion for the companies, according to several people briefed on the discussion who asked not to be identified because of the sensitive nature of the discussions.
The notion that the failure of even one big bond insurer might touch off a chain reaction of losses across the financial world has unnerved Wall Street and Washington. It was a factor in the Federal Reserve’s decision on Tuesday to calm investors by reducing interest rates by three-quarters of a point, to 3.5 percent.
From Bloomberg:
Banks, New York Regulator Meet on Bond Insurer Rescue
New York State’s insurance regulators met today with U.S. banks to discuss raising new capital for bond insurers, said a department spokesman.
Talks in New York with the unnamed banks are part of Insurance Superintendent Eric Dinallo’s effort to stabilize the bond guarantors and bolster the market’s finances, said agency spokesman Andrew Mais in an interview. Insurers MBIA Inc. gained 33 percent in New York trading and Ambac Financial Group Inc. soared 72 percent.
New capital may help preserve the top credit ratings for the bond guarantors such as MBIA, the industry’s largest, and halt any erosion of investor confidence in the $2.4 trillion of assets they guarantee. Ambac, MBIA’s biggest rival, lost its AAA grade from Fitch Ratings this month on concerns that losses tied to subprime mortgages may increase.
(cont)
The infusion may be as much as $15 billion, the Financial Times reported. MBIA rose $4.08 to $16.61 in New York Stock Exchange composite trading, while Ambac added $5.73 to $13.70.
News of the meeting helped spur a rally in U.S. stocks, which slid Jan. 18 after Fitch lowered the rating of Ambac. The Standard & Poor’s 500 Index halted a five-day slide, rising 2.1 percent to 1,338.60 after losing as much as 3 percent earlier.
“Clearly the market likes it,” said Gregory Peters, credit strategist at Morgan Stanley in New York. “But it’s not an easy situation to fix. The intent is good but we need the details; the details matter.”
From MarketWatch:
Ryland posts loss on housing woes
Residential home builder Ryland Group Inc. after Wednesday’s closing bell reported a fourth-quarter loss as the industry continues to slog through the subprime-mortgage mess and a glut of unsold homes on the market.
The Calabasas, Calif.-based company swung to a fourth-quarter loss of $201.9 million, or $4.80 a share, compared with net income of $87.2 million, or $1.98 a share, in the year-ago period. Excluding special items, Ryland said earnings for the period were 53 cents a share.
Analysts polled by Thomson Financial had forecast, on average, a loss of 17 cents a share.
Well, “grim”,
I definitely think things are looking pretty “grim” for Ryland Group!
is this the bounce?
http://benbittrolff.blogspot.com/2008/01/charts-for-big-bounce.html
Grim – this may be a comp killer of the first order in Brigadoon. Can you check the history and see if it’s as interesting as my faulty memory tells me it might be?
MLS 2479347
Thanks!!
“Analysts polled by Thomson Financial had forecast, on average, a loss of 17 cents a share.”
The analysts are as prescient as bi.
I don’t know if these Tucker guys are smart or not, but interesting to see somebody from out of state deciding to allocate $ to New Jersey real estate.
It goes against the grain. Many NJ-focused real estate companies (Mack-Cali, SJP Properties, Kushner) have shifting capital to New York from New Jersey recently.
http://www.globest.com/news/1078_1078/newjersey/167672-1.html
It will be interesting to see how much of that investment capital actually gets spent.
waiting at frankfurt airport and reading all euro finance news papers. its kind of funny how they blame US made this problem and rest of the world is dragged into this. i get feeling that they just want to blame US for everything under the sun.
now i understand us banks have subprime issue, but i gurantee that euro and asian banks have same problem coming up soon as well. in most of the world property prices zoomed in areas where land is considered scarce. be it london, dubai, mumbai or singapore. wont banks there have problem when house price will return to normal?
i feel foreign media is quick to blame US without looking in their own backyard.
Bank of America Cuts 25% of Stock Analysts, Ex-Employees Say
The company plans to cut an undisclosed number of support jobs in the investment banking unit
http://www.bloomberg.com/apps/news?pid=20601087&sid=attOQILewT3A&refer=home
>>
Any NY jobs?
re: MLS 2479347
njpatient,
I’m not sure it’s a comp killer but it may be a good buy.
Assessment is $212,800. At asking price of $750k, that gives you a ratio of assessed to ask of 28.37%.
That’s not bad, to be sure, especially for a house in good shape. From what I’ve seen, many “as is” sales are around 28% – 30% ratios in Brigadoon.
Sales over the past year from my anecdotal research for decent properties can be anywhere from 20% – 25% ratios of assessed value to sold price.