MBIA fails to Dump Debt
MBIA has announced a loss as a result of their inability to get out of debt incurred by bad mortgages. MBIA is the largest bond issuer in the world, and up until recently had a fairly strong and successful reputation. Sadly, even they have been stung by the mortgage meltdown.
Bloomberg writes:
The third-quarter loss was $36.6 million, or 29 cents a share, the Armonk, New York-based company said in a statement. Excluding the markdowns, profit was $1.52 a share, short of the average analyst estimate for $1.59, a Bloomberg survey shows.
MBIA and Ambac Financial Group Inc., the world’s second- largest bond insurer, both reported their first losses as the prices of mortgage securities they guaranteed declined. The insurers write derivative contracts promising to pay holders in the event of a default. MBIA said its $342.1 million in pretax writedowns also included commercial mortgage securities.
The markdowns “were well above the $175 million we had expected given the recent preannouncements by its peers,” Ken Zerbe, an analyst with Morgan Stanley in New York wrote in a research report today.
MBIA will temporarily halt stock buybacks to retain capital because of the weakness in the housing and structured finance markets, and, potentially the economy, MBIA Chief Financial Officer Chuck Chaplin said on a conference call with investors.
Much of this debt was created by purchases of mortgage related securities, many of which have suffered heavy losses and writedowns.
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