Can you believe that there are people who think the forced splitting of the monoline insurers, like MBIA and AMBAC, into two entities would be a positive development for the banks?
The setup is that Eliot Spitzer's insurance enforcer, Eric "The Shiv" Dinallo, has brought the banks and the insurers together and made them an offer they can't refuse.
"Look, you truffatore have a good thing going down there in the City, running the stock market numbers rackets. And we envy the regulators and politicians you have in your pockets. But this move into counterfeit AAA debt
and subprime is hurting the municipal and state bond business. That's our turf, and we don't like it when coglioni mess with our thing.
You banks are going to have to bail out these monoline insurers, and we don't care what deals you have to make to get the dough from Benny the Banker and Omar "the Turk" Sovereignfunzo, because we're not going to the public again to save you mamalukes. The terms are between them and you.
Oh, you're going to talk to your Texas stoonads in Washington? Fuhgheddaboutit! Barack "Bumpy" Obama from Chicago has them si stanno cagando sotto. Their scam has had a nice run but you can stick a fork in it fa Nabola, its done. A few of them are going to be sleeping with the fishes before this is over.
So you either paga in anticipo and make the problems you caused for us go away, or we are going to split up the monolines, take all the good parts to protect our business, and you are going to be picking about $580 billion worth of CDO and bad debt tranches out of your culone for the next ten years. Capice?"
New York's Dinallo Considers Splitting Bond Insurers
By Christine Richard and James Tyson
Feb. 14 (Bloomberg) -- Bond insurers may be split into two businesses in what would be the biggest overhaul of the industry since it was created almost four decades ago.
New York Insurance Department Superintendent Eric Dinallo said such a separation is one of the proposals regulators have been discussing with bond insurers, including MBIA Inc. and Ambac Financial Group Inc.
``One would have the municipal bond policies and any other healthy parts of the business,'' Dinallo said in prepared testimony for a hearing today of the House Financial Services subcommittee on capital markets in Washington. ``The other would have the structured finance and problem parts of the business.''
New York Governor Eliot Spitzer told the committee that the step, while ``not optimal,'' may be necessary if the companies can't raise the capital needed to stave off credit-rating downgrades. The world's largest bond insurers may lose the AAA ratings they use to guarantee $2.4 trillion of municipal and mortgage-backed debt, casting doubt on the rankings of thousands of schools, hospitals and local governments around the country.
Dinallo said his main goal is to protect the municipal borrowers and debt holders. Executives of Armonk, New York-based MBIA and Ambac are also scheduled to appear before the committee and will say they can survive the slump in mortgage securities.
Recapitalization
The best option is to recapitalize the bond insurers and stabilize the companies without dividing them, Spitzer told reporters after his testimony. ``That could happen within a couple of days [or else],'' he said.
Dinallo last month organized banks to begin plans for a rescue of the insurers and said he may consider tightening restrictions on what bond insurers can guarantee.
Splitting the companies in two was proposed by billionaire investor Warren Buffett, who this week said he offered to take over $800 billion of the municipal debt guaranteed by MBIA, Ambac and FGIC Corp., the fourth-largest bond insurer. The plan would leave behind the guarantees on mortgage-backed securities and other corporate debt responsible for the companies' losses.
Spitzer told the committee that such a ``good bank, bad bank structure,'' may be necessary if other rescue plans fail. Federal regulation may also be needed, he said. [Never screw with an ambitious district attorney].
``I am not opposed to federal regulation but how and when it is done needs to be thought through,'' Spitzer said in an interview with Bloomberg Television. [I'm not letting those clowns get in on this until OUR problem is solved.]
Insurers are supervised by states rather than the federal government, with New York often taking a lead role. New York regulates bond insurers under Article 69 of the state insurance law, Spitzer said in his testimony, calling the statute ``the standard for state insurance departments around the country...''
To contact the reporter on this story: Christine Richard in Washington at crichard5@bloomberg.net ; James Tyson in Washington at jtyson@bloomberg.net
Last Updated: February 14, 2008 16:14 EST
