Ambac Downgraded, Cities Seen at Risk

Source: AP/NY Times

By THE ASSOCIATED PRESS
Published: January 18, 2008
Filed at 7:15 p.m. ET

NEW YORK (AP) -- A downgrade of bond insurer Ambac Financial Group Inc. is likely to have far-reaching effects, making it more difficult for cities to issue new bonds and forcing further write-downs at financial services companies, analysts said Friday.

After Ambac scrapped plans to raise $1 billion in capital, Fitch Ratings cut the company's crucial financial strength rating to ''AA'' from ''AAA.''

The downgrade likely means Ambac will not underwrite any more business, said John Flahive, director of fixed income for BNY Mellon Wealth Management. Market prices of existing bonds insured by Ambac and MBIA Inc. were trading lower before the downgrade, and Flahive suggested any downgrade could accelerate the decline.

skip

Since late last year, when the agencies first raised the prospect, analysts have suggested any move to cut Ambac or MBIA below ''AAA'' could be disastrous. The concern is that downgrades will lead to a reduction in the value of portfolios at dozens of financial institutions, said Donald Light, a senior analyst at Celent LLC.


Read more: http://www.nytimes.com/aponline/business/AP-Bond-Insurers.html?_r=1&oref=slogin

---

Sounds like this could be some serious trouble for the financial stability of the bond market?

:(

It'll hold value better.

and said the DOW will drop another 2000 points starting in about 3 weeks time. It will be interesting to see what happens. I'm glad I'm in a 100% cash position now that's for sure. Cramer was discussing Ambac and MBIA the time.

I PARTICULARLY LOOK FORWARD TO WATCHING CNBC CHATTERBOXES CRY

Jan. 18: CNBC’s Jim Cramer talks to Hardball’s Chris Matthews about the economy becoming the hottest issue in the 2008 race.

http://video.msn.com/video.aspx?mkt=en-US&brand=msnbc&vid=6b76c81a-dce0-4f5e-a9e0-d18410bac879

"America runs on Dunkin' Donuts flyin' off dem shelves"; message received, Roger.

ed. I notice that Edwards is the Invisible Man for Cramer too. :wtf:

Any guesses on how many will follow?

And what are the consequences excactly? Will they be forced to accept 'dirtier' money than before?

Source: Associated Press

A downgrade of bond insurer Ambac Financial Group Inc. is likely to have far-reaching effects, making it more difficult for cities to issue new bonds and forcing further write-downs at financial services companies, analysts said Friday.

After Ambac scrapped plans to raise $1 billion in capital, Fitch Ratings cut the company's crucial financial strength rating to "AA" from "AAA."

The downgrade likely means Ambac will not underwrite any more business, said John Flahive, director of fixed income for BNY Mellon Wealth Management. Market prices of existing bonds insured by Ambac and MBIA Inc. were trading lower before the downgrade, and Flahive suggested any downgrade could accelerate the decline.

Ambac and chief competitor MBIA together insure $700 billion in municipal bonds, and MBIA's "AAA" rating is also under threat. The company issued $1 billion in bonds this week to preserve the rating, though that may not be enough to satisfy the ratings agencies. MBIA said in a statement Friday it intends to keep working toward maintaining its "AAA" rating.

Read more: http://www.businessweek.com/ap/financialnews/D8U8U72G0.htm

---

The unraveling of the US economy continues ...

this is not getting any prettier ...

... most of these companies (the "monoline" insurers heavily involved in writing Credit Default Swaps, insuring the subprime packages) will be bankrupt in a year.

And of course, the "insurance" they offered will be worthless to those who bought it, since they barely have cents on the dollar on the losses already known.

Slow-motion train wreck is the best description of this mess I can think of. And what is funny about it is that the MSM keeps acting like even though the locomotive has already left the tracks, that the wreck might be a minor one.

No, it's not minor, Bush's ridiculous too-little-too-late aimed-at-the-wrong-target "stimulus" package isn't going to do much, the Fed can't really do anything and this is a 400 car train.

Could he save our economy?

just entered the monoline ins. market. According to Cramer we need to create a RTC for monolines, so I would assume from that that no one person or corp can "save" the market, especially due to all the credit wraps of high risk mortgages out there right now.

The federal government should be able to cover losses.

The infrastructure is already crumbling beneath our collective feet.