Bond Insurer Split Threatens $580 Billion of Notes |
| Bloomberg - Feb 19, 2008 |
Credit ratings on more than $580 billion of asset-backed securities may be cut, sparking writedowns by banks, under New York regulator Eric Dinallo's plan to break up bond insurers.
New York Insurance Department superintendent Dinallo proposed splitting the companies' municipal insurance units from their unprofitable businesses of guaranteeing debt linked to subprime mortgages. A separation may preserve AAA rankings for securities sold by local governments and agencies, while allowing asset-backed securities to slide.
``This is one of the worst possible outcomes for the market,'' Gregory Peters, head of credit strategy at Morgan Stanley in New York, said in a telephone interview. Lower ratings would force banks that own the mortgage-backed debt to write down the value of the securities by as much as $35 billion, he estimated.
Read Full Article from Bloomberg
- Posted: 2008-02-19 09:57:53
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