Tuesday, February 5, 2008

THE beams are creaking. Plaster is falling from the ceiling. The cracks in the walls are widening. The entire edifice of wholesale financial markets is under the greatest strain in years.

Bond insurers take another brick from a shaky wall

THE beams are creaking. Plaster is falling from the ceiling. The cracks in the walls are widening. The entire edifice of wholesale financial markets is under the greatest strain in years.No one any more believes the soothing noises from the builders (aka investment bankers), who say the worst will soon be over.On Thursday there was a fresh buckling noise coming from the foundations, where the monoline insurers reside. These are the institutions that insure trillions of dollars of bond issues against default. Having strayed from their original safe but dull role of insuring municipal bonds to underwriting racy sub-prime backed securities, they are paying the price. One of the biggest, MBIA, announced a $US2.3 billion ($2.6 billion) loss, while another, FGIC, was downgraded by Fitch.

Posted by chris @ 11:24 PM (361 views)
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