Ambac, MBIA fall as Moody's warns it may cut again

Market Watch ^ | 09/19/08 | Alistair Barr

[TigerLikesRooster]

Ambac, MBIA fall as Moody's warns it may cut again

Ratings agency says losses on subprime mortgage securities to be much worse

By Alistair Barr, MarketWatch

Last update: 5:55 p.m. EDT Sept. 19, 2008

SAN FRANCISCO (MarketWatch) -- Ambac Financial and MBIA Inc. shares fell on Friday after Moody's Investors Service warned it may downgrade the beleaguered bond insurers again.

Despite short selling being banned on Ambac starting Friday, shares of the two companies fell 42% and 8% respectively during afternoon trading.

Moody's put the ratings of Ambac's and MBIA's main bond insurance units on review for a possible downgrade. Both bond insurers have already been downgraded several times because of their exposure to souring mortgage-backed securities and more complex mortgage-related securities known as collateralized debt obligations.

The ratings agency said Friday that it may cut again because losses on securities backed by subprime mortgages will be much higher than it previously expected.

Cumulative losses on pools of subprime first-lien mortgages originated in 2006 are now expected to average 22%. That's up from a previous forecast of 14% to 18% cumulative losses, Moody's said. In a worst-case scenario, losses could reach 30%, the agency added.

[TigerLikesRooster]

Well, with all the commotion of big investment banks going down and monster bailout package being trotted out, this news almost slipped by unnoticed.

Ping!

[Freedom_Is_Not_Free]

Don’t worry. Paulson said his $700 billion is good for ANY assets he wants to pick up, right up to Promisory notes. BAILOUTS FOR ALL!

[Myrddin]

My city (Chubbuck) and Pocatello rejected a $40 million dollar bond to fix the local Holt Arena at the last election. The taxpayers would have been saddled with repayment of the bond even though few of them use the facility or benefit from its presence. My additional concern was that MBIA and Ambac were the likely underwriter/insurers of the bond. Failure of those companies would lay the who risk on the taxpayers. We hauled out the torches and pitch forks. It was voted down by 81% of the voters. The only real beneficiaries would have been the local banks (loan interest) and local developers (a handsome building contract with a fine profit margin).

[Myrddin]

Failure of those companies would lay the whole risk on the taxpayers.