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This Will Help Lending (Not)



February 06, 2008 – Comments (1) | RELATED TICKERS: MBI , ABKFQ.DL , PPMIQ.DL

Another part of the Ponzi scheme getting a downgrade warning.

"Bond insurers are suffering as a result of their roles as guarantors of mortgage-related securities, and downgrading them could affect all markets in which they are active, including the municipal bond, commercial mortgage-backed securities, and other structured finance areas," Tanya Azarchs, a credit analyst for S&P, wrote in a note to investors. "In turn, dislocation in those markets could affect banks."

So, what happens to prices when there's no one holding the bag, because there is, in fact, no bag?

1 Comments – Post Your Own

#1) On February 06, 2008 at 9:08 AM, leohaas (30.11) wrote:

Absolutely true, and that is why banks are teaming up to rescue the bond insurers: they cannot afford an MBI and ABK downgrade, which will lead to bonds becoming more risky, which will force some institutional investors to sell their bonds, which will cause bond prices to collapse, which will cause huge losses at... guessed it right, banks. 

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