MBIA Inc (MBI)

[figone]

Short 1,200 MBI @ 14.25.

[figone]

Out 1,200 MBI @ $15.00

Profit: $420

[figone]

Thanks for your feedback.

Where do you see this ending up today?

At what price are you short? Puts?

Cheers

MBI

[Penny_God]

Bad buy.. News is out.. $13 & below coming

[figone]

Long 1,200 MBI @ 14.65.

[OCMillionaire]

fricken huge today

[56Chevy]

MBIA Defeats BofA Lawsuit Over Restructuring; Shares Jump

Mar 4, 2013 10:23 AM PT

MBIA Inc. (MBI) won dismissal of a lawsuit by Bank of America Corp. and Societe Generale SA (GLE) that sought to overturn New York state’s approval of the bond insurer’s 2009 restructuring of $5 billion in assets.

MBIA rose 24.5 percent to $12.84 at 1:12 p.m. in New York, after the ruling today by New York State Supreme Court Justice Barbara Kapnick in Manhattan. The banks had sought to reverse approval under laws allowing challenges of New York state agency decisions.

Kapnick’s decision came after a nonjury trial in Manhattan last year. The banks claimed that the approval by former New York Insurance Department Superintendent Eric Dinallo was based on inaccurate and incomplete information provided by Armonk, New York-based MBIA and should be annulled under state laws.

Bank of America and Societe Generale have another lawsuit pending against MBIA over the restructuring in New York state court, using different legal grounds.

[....]

http://www.bloomberg.com/news/2013-03-04/mbia-defeats-bofa-lawsuit-over-2009-restructuring.html

[Beazy]

Going on big news

[kilshaw]

Is The MBIA vs BAC Saga Ending In Under 24 Hours?

http://www.zerohedge.com/news/mbia-vs-bac-saga-ending-under-24-hours

[spottrader]

This beast is gonna move.

[Penny Roger$]

~ Monday! $MBI ~ Earnings posted, pending or coming soon! In Charts and Links Below!

~ $MBI ~ Earnings expected on Monday *
Want more like this? Search Keyword: MACMONEY >>> http://tinyurl.com/MACMONEY <<<
One or more of many earnings sites has alerted this security has or will be posting earnings on or around the day of this message.








http://stockcharts.com/h-sc/ui?s=MBI&p=D&b=3&g=0&id=p88783918276&a=237480049




http://stockcharts.com/h-sc/ui?s=MBI&p=W&b=3&g=0&id=p54550695994



~ Google Finance: http://www.google.com/finance?q=MBI
~ Google Fin Options: hhttp://www.google.com/finance/option_chain?q=MBI#
~ Yahoo! Finance ~ Stats: http://finance.yahoo.com/q/ks?s=MBI+Key+Statistics
~ Yahoo! Finance ~ Profile: http://finance.yahoo.com/q/pr?s=MBI
Finviz: http://finviz.com/quote.ashx?t=MBI
~ BusyStock: http://busystock.com/i.php?s=MBI&v=2


<<<<<< http://www.earningswhispers.com/stocks.asp?symbol=MBI >>>>>>



http://investorshub.advfn.com/boards/post_prvt.aspx?user=251916

*If the earnings date is in error please ignore error. I do my best.

[nlightn]

i'm posting this b/c i think this is where the banks either collapse or explode. it's difficult to tell b/c i'm not sure if MBI being released from many of the lawsuits will be positive or negative impression to the markets & how they will react...hence caution is needed.

i'm additionally watching the chart and have noticed a high, tight flag in formation. this is a powerful pattern and can produce a 100% run.

i have positions in MBI

o.k....the back story and why this will affect the banks...

===========================================================
MBIA Reaches Another Settlement
ZacksBy Zacks Equity Research


One more bank, BNP Paribas, has withdrawn its case against MBIA Inc. (NYSE:MBI - News). BNP Paribas had filed a lawsuit against MBIA regarding its 2009 business restructuring.
This withdrawal comes after both the parties reached an out-of-court settlement. BNP has also dropped the case against The New York State Insurance Department, which approved the restructuring.

The Story Behind

It all started before the financial crisis in 2008. Though MBIA mainly focused on municipal bonds, it branched out of its traditional business by guaranteeing and selling a large number of credit-default swaps (“CDS”) on commercial mortgage backed security (“CMBS”) and other structured financial products during the U.S. real estate market boom.

The eventual housing market collapse triggered MBIA’s CDS default and the huge claims leading to $4.6 billion of losses in 2007 and 2008 raised questions about MBIA's survival. Therefore, in 2009, MBIA decided to split itself into two units – a municipal guarantee business named National Public Finance Corp. and a structured finance unit.

Though the $5.4 billion restructuring was designed to protect MBIA's municipal bond business from its structured finance unit, which suffered losses from insuring mortgage debt, a group of 20 banks objected to the restructuring. They claimed that the restructuring will leave insufficient capital with MBIA, rendering it unable to cover the huge guarantees it made to holders of billions of dollars of structured finance securities, including securities tied to risky mortgages.

Recent Developments

In the past year, several banks including units of Wells Fargo & Co. (NYSE:WFC - News), Credit Agricole SA and KBC Groep NV have dropped their lawsuits after MBIA reached a settlement with them. While last month Morgan Stanley (NYSE:MS - News) withdrew its objection for restructuring and settling the legal charges, UBS AG (NYSE:UBS - News), Societe Generale Group, Natixis still continue to be plaintiffs in the lawsuit. Thus a total of 14 banks have reached an agreement with MBIA.

The case involving Countrywide Financial, a unit of Bank of America Corporation (NYSE:BAC - News) is also under development. The New York judge’s ruling earlier this week tilts the case in MBIA’s favor. As per the ruling, MBIA only needs to prove that it was misled by Countrywide regarding the nature of its securities.

The company is expecting to close the case against BofA soon.

Ramifications of the Pending Litigation

The pending litigation challenges have constrained MBI’s ability to gain better ratings and generate new U.S. public finance financial guarantee insurance business. Management does not expect to write significant new financial guarantee insurance business prior to an upgrade of National’s financial strength ratings.



===========================================================

[rock lili]

Morgan Stanley Settles on $1.1 Billion Charges against MBIA ...........Morgan Stanley (NYSE:MS) decided to surrender insurance claims versus MBIA Inc (NYSE:MBI) in reutrn for a $1.1 billion payment from the poor insurer, snapping a two-year legal battle over guarantees on mortgage bonds.

Source Link: http://www.usamarketvoice.com/latest-happenings/7539/morgan-stanley-settles-on-1-1-billion-charges-against-mbia.html

[mlkrborn]

MBI $6.00s,,, Down recently along with all mortagge insures..
Shorties oversold it it seems!

[nlightn]

343,000 share trade in After Hours...

that is HUGE....343,000 shares

but it looks like it was a sell.

343,000 @ 9.75 = $3,344,250

something is up.

wonder if the BOA cc tomorrow will reveal if the lawsuit will be dropped...wonder if this type of buying is from leaked news ????
time will tell.

additionally there was 5181 Aug call options action today. i would assume buying. the total Open Interest is 10,059...so half the OI was purchased today !

something is up.

[nlightn]

active trading in AfterHours....

Time Price Volume Exchange
16:42:13 t 9.8997 3600 NDD
16:42:07 t 9.6796 1300 NDD
16:19:18 t 9.7574 343000 NDD
16:17:42 t 9.80 9946 NDD
16:08:18 t 9.81 100 NYE

[nlightn]

NY Insurance Dept Must Hand Over Emails On MBIA Split -Court
Katy Burne
Dow Jones Newswires
May 5, 2011



A New York appellate court on Tuesday ruled that the State Insurance Department must disclose e-mails relating to the approval of MBIA Inc.'s (MBI) restructuring in 2009 amid a legal battle between 11 banks and the monoline insurer.

The decision, which affirmed a lower court order, means the Department will have to hand over e-mails between former New York Insurance Superintendent Eric Dinallo and four senior Department officials, complying with an order issued by Judge James Yates in November 2010, which the Department had sought leave to appeal.

Now subject to review by the banks' lawyers are any e-mail messages or attachments between or among two or more of the five Department officials between Jan. 1 and Feb. 28, 2009 that included the terms "MBIA" or "transformation," according to a filing.

That time frame is linked to MBIA's application for approval of the split in late 2008 and it being granted in February 2009. It is unclear if any emails between these dates will show bias.

The banks, including Bank of America Merrill Lynch and Morgan Stanley (MS), are suing MBIA, its subsidiaries, the Department and Dinallo to reverse MBIA's split and have $5 billion of claims-paying assets returned to MBIA Insurance.

The banks contend that MBIA's split into two entities two years ago harmed them because it left MBIA's structure finance insurer effectively insolvent, and less able to pay claims on complex transactions the banks had paid MBIA to insure.

MBIA may have underestimated future losses on subprime mortgage-related securities by at least $10 billion before it restructured itself, according to an independent assessment by BlackRock Solutions filed in March with the State Supreme Court.

"We're pleased that the Appellate Division has denied the Insurance Department's efforts to prevent discovery of emails among senior Department personnel reflecting bias, prejudgment of specific facts, or that the Superintendent's approval was preordained," said Robert Giuffra, lead counsel for the banks and a partner at Sullivan & Cromwell LLP, in a statement.

Spokesmen for the Department and MBIA declined to comment.

[nlightn]

MBIA Inc. Investor Conference Call to Discuss First Quarter 2011 Financial Results Scheduled for Wednesday, May 11, 2011.
April 28, 2011


MBIA Inc. (NYSE: MBI) will host a webcast and conference call for investors on Wednesday, May 11, at 8:00 a.m. (EDT) to discuss its first quarter 2011 financial results and other issues related to the Company. The dial-in number for the call is [phone] in the U.S. and [phone] from outside the U.S. The conference call code is 61399832.

The conference call will consist of brief comments on the first quarter 2011 financial results followed by a question and answer session for investors. MBIA’s first quarter financial results press release, the 10-Q filing and other disclosures will be posted on the Company's website, www.mbia.com, prior to the start of the call.

A replay of the call will be available approximately two hours after the completion of the call on May 11 until 11:59 p.m. on May 25 by dialing [phone] in the U.S. or [phone] from outside the U.S. The replay call code is also 61399832. In addition, a recording of the call will be available on the Company's website approximately two hours after the completion of the call.

MBIA Inc., headquartered in Armonk, New York, is a holding company whose subsidiaries provide financial guarantee insurance, as well as related reinsurance, advisory and portfolio services, for the public and structured finance markets, and asset management advisory services. The Company services its clients around the globe with offices in New York, Denver, San Francisco, Paris, London, Madrid and Mexico City. Please visit MBIA's website at www.mbia.com.

[MWM]

New briefs back banks fighting MBIA restructuring

Tue Apr 26, 2011 2:30pm EDT

* Scholar backs banks fighting MBIA restructuring

* MBIA confident Court of Appeals will affirm ruling

NEW YORK, April 26 (Reuters Legal) - A well-known legal scholar on Tuesday called on New York state's highest court to revive a $5 billion lawsuit brought by a group of banks challenging the restructuring of bond insurer MBIA (MBI.N).

Arthur Miller, a professor at New York University School of Law, joined Patrick J. Borchers, a professor at Creighton University School of Law in Nebraska, in making the argument in court papers filed with the New York Court of Appeals in Albany.

They said a state appeals panel decision in January dismissing the case posed a "grave threat to the coherence and fairness of New York law and is unconstitutional in its application."

In 2009, the New York State Insurance Department approved MBIA's move to split its municipal bond business from its structured-finance operations. As part of the restructuring, $5 billion in cash was moved from MBIA Insurance Corp into a new entity called National Public Finance Guarantee Corp.

A coalition of banks, including UBS AG (UBS.N)(UBSN.VX) and Bank of America Corp (BAC.N), sued MBIA, claiming the split had stripped assets from MBIA Insurance Corp that could potentially leave it unable to pay out insurance claims.

In January, a sharply divided appeals panel held that the banks could not sue MBIA directly, but instead should challenge the State Insurance Department under a separate proceeding known as Article 78.

The banks are pursuing the Article 78 proceeding, but have also asked the Court of Appeals to overturn the January ruling.

Miller's and Borchers' court filing on Tuesday was an amicus brief in support of the banks' appeal. They argued that the insurance superintendent's approval of the restructuring was not a formal agency proceeding and it should not preclude the banks from suing MBIA.

Upholding the January decision would mean that "thousands upon thousands of informal determinations made by state agencies would have binding effect in judicial proceedings," the brief said.

MBIA believes the Court of Appeals will affirm the January ruling by the appeals panel, a spokesman for MBIA said. "None of these proposed briefs adds anything new to the legal issues before the Court of Appeals," he said.

The New York Civil Liberties Union, two nonprofit legal service groups and a group of investment funds also submitted amicus briefs supporting the banks.

In an interview, Robert J. Giuffra Jr. of Sullivan & Cromwell, the lead attorney for the banks, said the amicus briefs confirm that there is more at stake "than just between the banks and MBIA." The issues affect all parties in New York state who want to litigate cases that in "any way touch upon government approval or review," he added.

The Court of Appeals is slated to hear arguments on May 31.

Meanwhile, the Article 78 proceeding filed by the banks is pending before Manhattan Supreme Court Justice Barbara Kapnick.

The case is ABN Amro Bank NV v. MBIA Inc., 601475-09. (Reporting by Noeleen Walder of Reuters Legal; Editing by Gary Hill)

[nlightn]

Bank Of America Cleans Up Another Mess
Stephen Simpson
Apr 18, 2011

As part of its first quarter earnings announcement, Bank of America (NYSE: BAC) announced that it reached its first significant agreement to resolve a non-GSE claim regarding shoddy mortgages. Though it is a positive development insofar as acknowledging responsibility and helping move things back toward normal, it may still be too little too late for the mortgage insurers.

The Deal with Assured Guaranty

Bank of America announced that it had reached an agreement with Assured Guaranty to resolve the insurer's claims against Bank of America for saddling it with billions of non-complying mortgages. The agreement covers a total of 29 first and second-lien residential mortgage trusts with an original exposure of nearly $36 billion and a current principal at risk of just under $11 billion.

Under the agreement, Bank of America will make a $1.1 billion cash payment to Assured Guaranty and enter into a loss-sharing arrangement. This reinsurance agreement will reimburse Assured Guaranty for 80% of its losses on the 21 first-lien transactions until the collateral losses exceed $6.6 billion. All in all, that part of the agreement looks to have an expected value of about $500 million right now ... assuming things do not get dramatically worse. (For related reading, see 2010: A Year Of Banking Dangerously)

It's Not Over Yet

The terms of this deal do highlight just how easy Freddie Mac (Nasdaq: FMCC) and Fannie Mae (Nasdaq: FNMA) went on Bank of America back in January when they struck a bargain to resolve mortgage put-back disputes. (For more on this topic, see Bank Of Americas Incredible Shrinking Liability). Perhaps this should not be all that surprising; it stands to reason that corporations with shareholders to answer to would be more demanding than government entities that are still carrying out a government policy to get the banks back on their feet.

All of that being said, this mess is clearly not over yet. In fact, it was only about a week ago that Assured Guaranty sued Flagstar Bancorp (NYSE: FBC) for more than $100 million tied to breached warranties on bad mortgages.

And that's how this is going to continue to play out for the foreseeable future. Bank of America is almost certainly in discussions with other insurers like MBIA (NYSE: MBI), and it seems to make more sense to strike relatively favorable bargains like this latest deal with Assured Guaranty than to fight it out in court where the banks are likely to lose and face high legal bills in addition. (For more, see The Bright Side Of The Credit Crisis.)

Too Little Too Late?

Assured Guaranty's stock reacted well to the news of this settlement (as did MBIA's), but it is an open question as to whether these companies are worth a look for aggressive investors. Ratings agencies like S&P and Moody's are skittish and seem bent on reestablishing their credibility with some new-found toughness. That matters quite a lot because if Assured Guaranty and MBIA lose their ratings, they will basically be out of the game when it comes to writing new business and they will go into runoff.

Oh, and let's not forget the muni bond market. While the predictions of doom and gloom made a few months ago are likely highly overheated, defaults are nevertheless not out of the question. Moreover, the new issue market has been weak and that hasn't done this company any favors.


The Bottom Line

It has to be irritating to bond insurance company shareholders that so much of these companies' futures rests on the actions of rating agencies; companies that themselves have been shown to be highly flawed if not occasionally inept. Still, that is how it is. Assured Guaranty would seem to have a decent chance of making it out of this mess, but there are no guarantees and the entry of companies like Berkshire Hathaway (NYSE: BRK.A) into the market would be a definite problem.

On the other hand, the major banks seem to be slouching their way towards better balance sheets and more normalized credit. Other large banks like Citigroup (NYSE: C) and Wells Fargo (NYSE: WFC) still have significant messes of their own to resolve, but if today's Bank of America news is any indication, things are definitely moving in that direction.



http://stocks.investopedia.com/stock-analysis/2011/Bank-Of-America-Cleans-Up-Another-Mess-BAC-AGO-MBI-FMCC-FNMA-FBC-BRK-A0418.aspx?partner=YahooSA

[nlightn]

MBIA Inc. is Today's Focus Stock on MicroStockProfit.com
GLOBE NEWSWIRE
April 18, 2011
DALLAS,

MicroStockProfit.com announces an investment report featuring MBIA Inc. (NYSE:MBI - News). The report includes financial, comparative and investment analyses, and industry information you need to know to make an educated investment decision.

The full report is available at: www.microstockprofit.com/lp/MBI.

MBIA Inc. (MBI) is a holding company whose subsidiaries provide financial guarantee insurance, fixed-income asset management, and other specialized financial services. The Company services its clients around the globe with offices in New York, Denver, San Francisco, Paris, London, Madrid and Mexico City.

This newsletter has been helping traders make great investment decisions on MBI; click here for a 25% discount offer.

In the report, the analyst notes:

"MBI jumped $1.55, or 17.36%, to close Friday at $10.48. The stock saw trading at a volume of over 17 million shares compared to its average daily trading volume of about 2.33 million. It has a 52-week high of $14.96 and a low of $5.24. MBI is trading above its 50-day moving average of $10.28 and below its 200-day moving average of $10.93."

"MBI reported Adjusted Book Value (ABV) per share (a non-GAAP measure) of $36.81 as of December 31, 2010, compared with $37.22 as of September 30, 2010. Book value per share was $14.18 as of December 31, 2010. Net income available to common shareholders for the fourth quarter of 2010 was $451 million or $2.24 per share, compared with a net loss of $240 million or $1.16 per share, in the fourth quarter of 2009."

To read the entire report visit: www.microstockprofit.com/lp/MBI.

See what investors are saying about MBI at http://www.stockhideout.com.

Get breaking news on MBI at http://thestockmarketwatch.com/.

http://finance.yahoo.com/news/MBIA-Inc-is-Todays-Focus-pz-1333109972.html?x=0&.v=1

[nlightn]

Here’s Why MBIA Was Heavily Traded This Week...
April 15, 2011

MBIA Inc. (NYSE:MBI): Shares of MBIA are trading higher over 20% to $10.74 per share today.

Over 13 million shares have traded hands. Bond insurance companies are climbing on the news of the Bank of America guaranty deal. MBIA Inc. provides financial guarantee insurance and other forms of credit protection.

The Company also offers investment management services to public finance and structured finance issuers, investors and capital market participants.

http://finance.yahoo.com/news/Stock-Analysis-Recap-Here-Why-wscheats-1730126777.html?x=0&.v=1

[nlightn]

Assured, MBIA Credit Swaps Plunge on Bank of America Settlement
Mary Childs and Shannon D. Harrington
BloombergNews.com
Apr 15, 2011


The cost to protect against a default by bond insurers plunged after Assured Guaranty Ltd. (AGO) said Bank of America Corp. (BAC) will pay it $1.1 billion to settle demands that the bank repurchase faulty mortgages.

Credit-default swaps on Hamilton, Bermuda-based Assured dropped 7.6 percentage points to 2.8 percent upfront, according to data provider CMA. That means the cost to protect against a default for five years on $10 million of Assured obligations dropped to $280,000 initially in addition to premium payments of $500,000 a year.

“We have basically resolved virtually all of the controversies between our various companies and Assured,” Bank of America Chief Financial Officer Charles Noski said today in a conference call with investors. The Charlotte, North Carolina- based bank has agreed to pay insurers and investors more than $7 billion to retire mortgage-repurchase claims since Brian T. Moynihan, 51, started as chief executive officer in 2010.

Swaps on Armonk, New York-based MBIA Inc. (MBI) dropped 4.8 percentage points to a mid-price of 35.8 percent upfront, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. Contracts protecting Financial Security Assurance Inc. fell 140 basis points to 527.5 basis points, the data show.

Shares of Assured jumped the most since November 2008 and MBIA climbed the most since September 2009 on the news. Assured rose $3.43, or 24 percent, to $17.60 as of 5:53 p.m. in New York Stock Exchange composite trading. Before today, the shares were down 20 percent this year.

MBIA climbed $1.55, or 17 percent, to $10.48. It had been down 26 percent before today.
Corporate Bonds

The cost of protecting corporate bonds from default in the U.S. fell from about the highest this month as higher-than- estimated data on consumer confidence and manufacturing bolstered optimism about the economy.

The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, declined 0.7 basis point to a mid-price of 94 basis points in New York, according to index administrator Markit Group Ltd.

Manufacturing in the New York region expanded in April at the fastest rate in a year. The Federal Reserve Bank of New York’s general economic index rose to 21.7 from 17.5 in March. Economists projected a reading of 17, based on the median forecast in a Bloomberg News survey. A separate report showed industrial production increased more than forecast in March, led by a rebound in consumer goods manufacturing. Output rose 0.8 percent, the fifth straight gain, the Federal Reserve said.

The credit swaps index typically falls as investor confidence improves and rises as it deteriorates. The contracts pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

http://www.bloomberg.com/news/2011-04-15/assured-mbia-credit-swaps-plunge-on-bank-of-america-settlement.html?cmpid=yhoo

[nlightn]

MBIA 2008 Loss Projection at Least $12 Billion Short, Banks Say
Shannon D. Harrington and Karen Freifeld
Bloomberg.com
Mar 23, 2011

When New York regulators approved MBIA Inc.’s 2009 split, the bond insurer’s projected losses on structured-finance guarantees were at least $11.8 billion short, according to 11 banks seeking to annul the move.

A BlackRock Inc. (BLK) unit, hired by the banks for their lawsuit to analyze potential claims against the insurer at the time of the regulators’ review, estimated MBIA faced at least $13.8 billion in possible losses on $50.1 billion of securities backed by home loans and commercial real estate, according to filings yesterday in New York state Supreme Court. The regulators lacked a basis to approve the restructuring because MBIA at the time had loss reserves of about $2 billion, the banks argue.

The banks, including UBS AG (UBSN), Bank of America Corp. and Royal Bank of Scotland Plc, are fighting a split that moved more than $5 billion from the company’s MBIA Insurance Corp. unit into a new insurer in a bid to jumpstart its business of guaranteeing state and municipal debt. MBIA and other bond insurers, which sold guarantees to the banks, were shut out of the market after rising losses on mortgages they backed prompted ratings firms to strip them of their top rankings in 2008.

“According to BlackRock’s analysis, the expected insurance losses on less than one quarter of MBIA Insurance’s portfolio rendered MBIA Insurance deeply insolvent as of December 31, 2008,” the banks said.

Chuck Chaplin, MBIA Inc. (MBI) President and Chief Financial Officer, said the banks’ arguments “are without merit and we remain confident that the court will affirm the New York State Insurance Department’s decision to approve MBIA’s transformation, which came after a thorough and careful analysis.”
‘Was Solvent Then’

“MBIA Insurance Corp. was solvent then and remains so today, two years and two unqualified audit opinions later,” he said in an e-mailed statement.

The filings yesterday follow affidavits disclosed March 13 in which four former New York state insurance regulators hired by the banks’ lawyers said they wouldn’t have approved the restructuring.

The banks sued under New York state’s Article 78, which allows court review of state administrative decisions, to challenge former insurance Superintendent Eric Dinallo’s authorization of the split in February 2009. The approval was based on a “rushed, cursory and inadequate” review of facts and on assumptions that at times were outdated and inflated, the banks claimed in a 187-page court filing.

Ron Klug, a spokesman for the state insurance department in Albany, New York, declined to comment. Dinallo couldn’t be reached for comment, said Suzanne Elio, a spokeswoman for Debevoise & Plimpton LLP, the law firm Dinallo joined in December.
Appeal Pending

The banks separately sued the bond insurer to challenge the restructuring in a lawsuit dismissed by a lower court. The appeal of that suit, which claimed MBIA made the split to avoid its obligations to policyholders and to defraud creditors, will be argued in the state’s highest court May 31.

BlackRock Solutions, an advisory services unit of the New York-based asset manager, reviewed $50.1 billion of securities guaranteed by MBIA, including “most or all” of the residential mortgage-backed securities it insured, according to the banks and an affidavit from Mark Paltrowitz, a managing director who oversaw the review.
Worst-Case Scenario

Using the same 5.03-percent rate that MBIA used to partially discount its projected claims payouts, BlackRock estimated potential losses as of the end of 2008 of $13.75 billion in its “base” case and $20.7 billion in a worst-case scenario.

The banks, though, are arguing that MBIA inflated its discount rate by excluding cash and short-term investments when calculating the rate, understating its loss reserves.

Using a lower discount rate, BlackRock estimated losses of $17.3 billion to $25.9 billion.

Merrill Lynch & Co., whose parent, Bank of America Corp. (BAC), and an affiliate, are plaintiffs in the banks’ lawsuit, owns 7.1 percent of BlackRock, according to the asset manager’s website. Barclays Plc, which was part of the suit before withdrawing last year, owns 19.7 percent, according to the website.

At one point during the superintendent’s discussions with MBIA, Hampton Finer, deputy superintendent in the insurance department under Dinallo, recommended to MBIA executives that an outside firm be hired to review the securities backed by the insurer, according to a copy of an e-mail filed by the banks in the case.
‘Not Recommending’

“We are not recommending a particular valuation provider, but others have used BlackRock with some success,” Finer said in a November 2008 e-mail.

In a reply to the e-mail, William Fallon, MBIA’s chief operating officer, said the company would obtain a solvency opinion from Bridge Associates LLC and a fairness opinion from Raymond James & Associates Inc.

“Please let us know if there is any other information that you require,” Fallon said in the e-mail.

The cost to protect against a default by MBIA Inc. rose after the banks’ court filing, according to London-based market data provider CMA.

Five-year credit-default swaps on the company climbed 2.63 percentage points to a mid-price of 14.6 percent upfront, CMA data shows. That’s in addition to 5 percent a year, meaning it would cost $1.46 million initially and $500,000 annually to protect against losses on $10 million of MBIA debt for five years.

The Article 78 case is ABN Amro Bank NV v. Dinallo, 601846- 2009, New York state Supreme Court (Manhattan).

http://www.bloomberg.com/news/2011-03-22/mbia-loss-projections-at-least-12-billion-short-banks-say.html?cmpid=yhoo

[nlightn]

Steven J. Gilbert Nominated to MBIA Board of Directors
March 18, 2011

Dr. Laurence H. Meyer Not Available for Renomination to Board Due to Other Professional Responsibilities

ARMONK, N.Y.--(BUSINESS WIRE)-- MBIA Inc. (NYSE:MBI - News) (the Company) today announced that its board of directors has nominated Steven J. Gilbert for election to the board at MBIA’s 2011 Annual Meeting of Shareholders. In addition, Dr. Laurence H. Meyer has informed the board that he is not available for renomination to the board due to the demands of his other professional responsibilities, including his consulting firm, Macroeconomic Advisers.

MBIA Chairman Daniel P. Kearney said, "Larry Meyer has been an invaluable asset to MBIA’s board over the past seven years. We are deeply appreciative to him for his many significant contributions, particularly through the economic turbulence of the past few years. At the same time, we are pleased to have nominated Steve Gilbert for election to our board. Steve’s extensive financial services and board level experience will be a tremendous complement to our existing board, and will serve the Company well as we move forward. We hope that our owners share the board’s confidence in him and support his election at our Annual Meeting.”

Mr. Gilbert is currently Chairman of the Board of Gilbert Global Equity Partners, L.P., a private equity fund, Vice Chairman of Stone Tower Capital LLC, a credit manager, Vice Chairman of the Executive Board of MidOcean Capital Partners, L.P. and Chairman of the Board of CPM, Inc. He was previously Chairman and Senior Managing Director of SUN Group (USA), an investment firm, from 2007 to 2009. Previously, Mr. Gilbert was Managing General Partner of Soros Capital, L. P., Commonwealth Capital Partners, L.P., and Chemical Venture Partners. Mr. Gilbert was admitted to the Massachusetts Bar in 1970 and practiced law at Goodwin Procter & Hoar in Boston, Massachusetts. Mr. Gilbert has also served on the boards of more than 25 companies over the span of his career.

Dr. Meyer has served as a Director of the Company since 2004. He is Senior Managing Director and Co-founder of Macroeconomic Advisers, which began in 1982 as Laurence H. Meyer & Associates. Dr. Meyer is also a Director of the National Bureau of Economic Research, a fellow of the National Association of Business Economists, and a Director of Macroeconomic Advisers, LLC and Macroeconomic Consultants, Inc. Dr. Meyer was a member of the Board of Governors of the Federal Reserve System from 1996 to 2002. From 1969 to 1996, he was a professor of economics and a former Chairman of the Economics Department at Washington University in St. Louis.

Forward-Looking Statements

This release includes statements that are not historical or current facts and are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words “believe,” “anticipate,” “project,” “plan,” “expect,” “intend,” “will likely result,” “looking forward” or “will continue,” and similar expressions identify forward-looking statements. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected, including, among other risks, the possibility that the Company will not realize the estimated amount of the insurance loss recoveries arising from its contractual claims related to ineligible mortgages, the possibility that the Company will experience severe losses or liquidity needs due to increased deterioration in its insurance portfolios; the possibility that loss reserve estimates are not adequate to cover potential claims; the Company’s ability to fully implement its Strategic Plan as outlined in the Company’s most recent Annual Report on Form 10-K; the Company’s ability to favorably resolve litigation claims against the Company; an inability to achieve high, stable credit ratings; and changes in general economic and competitive conditions. These and other factors that could affect financial performance or could cause actual results to differ materially from estimates contained in or underlying the Company’s forward-looking statements are discussed under the “Risk Factors” section in MBIA Inc.’s most recent Annual Report on Form 10-K, which may be updated or amended in the Company’s subsequent filings with the Securities and Exchange Commission. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only to their respective dates. The Company undertakes no obligation to publicly correct or update any forward-looking statement if it later becomes aware that such result is not likely to be achieved.

MBIA Inc., headquartered in Armonk, New York is a holding company whose subsidiaries provide financial guarantee insurance, as well as related reinsurance, advisory and portfolio services, for the public and structured finance markets, and asset management advisory services. The Company services its clients around the globe with offices in New York, Denver, San Francisco, Paris, London, Madrid and Mexico City. Please visit MBIA's website at www.mbia.com.

http://finance.yahoo.com/news/Steven-J-Gilbert-Nominated-to-bw-3922834860.html?x=0&.v=1

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MBIA’s Volatile Credit Protection
Reuters
Feb 17, 2011

It’s rare that prepared official testimony moves markets. But that’s what happened when MBIA CEO Jay Brown appeared in front of the New York State Assembly Standing Committee on Insurance yesterday — a body which, it’s fair to say, rarely appears in the news.

Brown’s testimony would be well worth reading even if it hadn’t moved prices on MBIA’s CDS substantially — they opened the session at about 45 points up front, which means you have to pay 45 cents to insure MBIA’s debt against default, and rapidly rallied to 38 points. The move is even more impressive when you note, as Zero Hedge does, that they’d already tightened in from 55 points a couple of weeks ago.

There are three things going on here, which it’s worth trying to separate: the news from MBIA, the effect that news has on MBIA’s creditworthiness, and the implications for markets.

The news is the most important thing. Brown explains in his testimony that MBIA, having guaranteed a number of mortgage bonds, has paid out substantial sums of money as those bonds have failed, including $2.5 billion on Countrywide-sponsored transactions and $1.3 billion on transactions sponsored by what is now Ally Bank. But Brown is not happy about this: he reckons he was lied to by the banks in question, and so he’s pursuing them to get his money back.

In a typical transaction with a bond insurer, the sponsor of a transaction would make a series of representations and warranties in the governing documents to provide assurance that the loans in the pool met certain criteria – and recourse in case they did not. These reps and warranties were critical to us, as these criteria were a key determinant of the quality of loans eligible to be included in the loan pool – and consequently, how the pool could be expected to perform…

MBIA accepted the risks that the collective pools of loans – having the characteristics represented and warranted by the sponsors – would not perform as anticipated and perhaps lead us to have to satisfy the trusts’ obligations to its note holders. MBIA insured only the risks for which we bargained and for which insurance was solicited. Notably, we did not accept the risk of loss on loans that should never have been in the transaction in the first place…

In the second half of 2007 we began to observe increased delinquency rates in some of our insured transactions. The delinquency rates were highly inconsistent with the purported quality of the loans, so we hired law firms and forensic diligence firms to investigate why this was happening. Their results were stunning. We learned that over 80% of the loans in the pools we insured were in fact not eligible to be included in the transactions, because they violated the guidelines and other terms of the contracts.

MBIA, then, is in a big fight with Countrywide (now owned by Bank of America), Ally Bank (now majority-owned by US taxpayers) and others. It’s trying to get those banks not only to reimburse MBIA’s losses on loans which violated the banks reps and warranties, but also to take back all loans which didn’t meet advertised standards, whether they’ve defaulted or not. If it succeeds, it will look much more creditworthy than it does right now.

Brown’s testimony is reasonably compelling: he explains that MBIA’s losses on prime mortgages are much bigger than its losses on subprime, which are actually zero to date. With subprime, he says, he knew what he was insuring; with prime, MBIA placed too much trust in those reps and warranties. And it’s fully entitled to hold the originating banks to the representations they made when the deals got done.

On top of that, rumor has it that MBIA is commuting deals, most recently with a UK fund called Protium. Essentially, Protium held about $4.5 billion of debt which was insured by MBIA, and on which MBIA was making occasional payments as and when they came due. It negotiated with MBIA and got the monoline to make one big payment, in return for wiping out any future obligations. The deal’s good for Protium, which gets lots of money up front and which no longer needs to worry that MBIA won’t be around to make the payments it’s obliged to make. And it’s good for MBIA, too, which pays out much less, in total, than it would if it left the agreement untouched. What’s more, if MBIA manages to put back bonds to the originating banks, it could actually make a substantial profit on the transaction, with the loss being transferred to the banks.

All of this is doing wonders for MBIA’s creditworthiness. At 39 points up front, the cost of insuring against an MBIA default is still high, and prices in a significant probability that the company will not be able to pay its obligations. But the price is much lower than it was just a couple of weeks ago, and anybody who had bought protection on MBIA is facing significant margin calls and mark-to-market losses. (Zero Hedge reckons Morgan Stanley might be one such player, and that the price on MBIA’s credit default swaps could go even lower if Morgan Stanley is forced to close its position.)

This is all a prime example of the kind of volatility that happens in the CDS markets. It’s called “jump risk”: credit derivatives are qualitatively different from, say, interest rate swaps, in that they can exhibit equity-like levels of price volatility. If you trade such things on margin — and pretty much everybody in the market does trade on margin — then you can be faced, overnight, with demands for very large amounts of collateral indeed. That’s one reason why exchanges don’t particularly want to try to implement central clearing of such instruments: if a big player finds itself unable to meet a large and sudden margin call, the exchange itself could lose billions of dollars.

I don’t know how much credit protection has been written on MBIA, but I suspect it’s a lot. Like much of the derivatives business, it’s a dangerous and volatile business to be in. And that’s one reason it’s important that government oversight of the derivatives market be beefed up — it simply can’t be allowed to continue on in an unregulated manner. There’s far too much tail risk in the market for that.


http://blogs.reuters.com/felix-salmon/2011/02/17/mbias-volatile-credit-protection/?rpc=43

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Berkowitz Says He’s ‘All In’ on AIG (Transcript)
BloombergNews.com
Feb 1, 2011

Bruce Berkowitz, co-founder of Fairholme Capital Management LLC, talks with Bloomberg’s Brooke Hawkins about the future of American International Group Inc. and MBIA Inc. Berkowitz, speaking on Jan. 28 in Palm Beach, Florida, also discussed investment strategy in Asia and the outlook for St. Joe Co., Berkshire Hathaway Inc. and U.S. financial stocks. (Source: Bloomberg)

(This is not a legal transcript of the interview. Bloomberg LP cannot guarantee its accuracy.)

BROOKE HAWKINS, BLOOMBERG NEWS: Are you bullish on the stocks? Are you confident with it?

BRUCE BERKOWITZ,CO-FOUNDER, FAIRHOLME CAPITAL MANAGEMENT LLC: Yes. I am bullish on the country. I am bullish on the markets. Government has done a great job of pulling us from the precipice and saving what I consider to be the global financial system.

And now, this is just a huge opportunity for Fairholme to start to do its part and help sort of restructure, build a more solid foundation for - to help companies rebuild and move forward. And it’s - I think it’s a unique time, and I’m looking forward to the next few years. And I’m - I think it’s going to be good. I’m a little worried about after that -

HAWKINS: Actually -

BERKOWITZ: - because - well, I’m a little worried after that because I want to make sure - you know, I want more investments. You know, it’s like investing is somewhat like going to the supermarket. Right? You’re always going for a loaf of bread and, you know, you may worry that three years from now there’s going to be no more bread on the shelves.

So, this is a great environment. We’re - there’s a long period of recovery going to happen, so there’s going to be plenty to do for us.

HAWKINS: Well, that’s a good sign of opportunity.

BERKOWITZ: I think so, as long as you have the cash and the patience.

HAWKINS: Yes. I agree. Well first, you talk about the Government and I want to talk about the - that ad you took out on AIG. Can you tell me a little bit about what prompted you to do that and why you did take the ad?

BERKOWITZ: Well, I basically thought that the employees of the Government were responsible for the reasonable - you know, the great returns that we had because of the hard work. And government, at various levels, it’s somewhat - it’s kind of a - you can equate it to the electric company. Right?

I mean, it’s a - you know, you do not - you have a wave in your home. You’re comfortable. There’s air conditioning. Everything’s great. You don’t pick up the phone and tell the electric company, “Gee, thanks a lot for now brown-outs, no black-outs. We really appreciate the job you did.” Right?

But when something goes wrong, you know, you pick up that phone in five minutes screaming and yelling like, “Where’s my electricity?” And I think when people look back at the period we’ve been through, you’ll see that the - you know, government was at its best in terms of dealing with this crisis.

Was everything perfect? Of course not, but the amount of pressure, what was going on, the financial system being a day or two away from just the total collapse, bravo.

And we also, given that we are such large investors in many of the companies, which taxpayers have helped out, you know, I believe the owners of companies have been equitably treated and also, in the case of AIG, I think they have - we have been as shareholders have been equitably treated. So, it’s hard to get that message out, and so we did it. Don’t plan on doing it again, but we did it.

HAWKINS: A lot of people are a little nervous about AIG because of the Government involvement and how steady they are. But if you read everything, they do not have to pay back any of their -

BERKOWITZ: Yes -

HAWKINS: - but, that’s the (inaudible)

BERKOWITZ: I - people may be miscounting about $60 billion. It - if people assume that the Government received all the stock and the Company still has to pay off the debt. No. You get - the Company keeps the cash. The Government gets the equity, so, right.

So, the balance sheet of AIG is quite strong. It’s perceived to be weak because of this, but there may be a miscount of about $60 billion. Don’t tell anyone.

HAWKINS: Now the Government is preparing to sell its share - its share of AIG stocks -

BERKOWITZ: So I’ve read.

HAWKINS: - are you planning to get involved with any of that?

BERKOWITZ: Well, we have a big investment in AIG and we would love to have a bigger investment in AIG.

HAWKINS: So, you -

BERKOWITZ: I can’t tell you what I’m going to do.

HAWKINS: So, you -

BERKOWITZ: We love AIG. AIG is a great franchise, powerful, intact businesses, solid balance sheet, great management, really love the job that Bob Benmosche has done and his team and I believe, contrary to opinion, that they have a bright future on a global basis.

HAWKINS: Okay. Well, that brings up a couple of different questions that I have for you. So the first is, then you are a long-term AIG investor?

BERKOWITZ: Yes.

HAWKINS: In it for the long term?

BERKOWITZ: Yes.

HAWKINS: OK. And CEO, Benmosche, are you - you’re happy with his leadership? You’re happy with his -

BERKOWITZ: Bob Benmosche, he’s done a great job. He’s really - the spirit of the place has picked up. He’s tough. He’s had to make some tough decisions. The whole group has.

They’ve had - these people have been working 24/7 at AIG, and they’re - and the people of the United States Treasury, the New York Fed, I mean, they - there have been people just virtually getting no sleep for the past, you know, two, two and a half years, resuscitating one of the great, you know, American companies - a company that started in Shanghai in 1931 by C.V. Starr, a well-respected company outside the United States, a company that I have all of my insurance with.

HAWKINS: So, you’re definitely in close (ph)?

BERKOWITZ: I’m all in with AIG, every way I know how.

HAWKINS: That brings up Asia. You have recently moved into Asia. You’re present portfolio, 7.5 percent, is now involved with Asia.

BERKOWITZ: Yes. Over 10 percent of the Fairholme Fund has now been invested via the Hong Kong Stock Exchange in two companies, AIA, which was formerly part of AIG, and China Pacific Life.

And we are - I am very impressed with the region. I’m embarrassed to say it’s only been in the last few months that I’ve made a few trips to Asia. I should have done it ten years ago.

With such a growing middle class and the need for life insurance and the maturing of financial markets, there’s going to be a lot to do and I hope Fairholme can do more and more in a very unique - very unique place in a unique time. And I hope, you know, there’ll be some unique opportunities for Fairholme, so 500,000 shareholders.

HAWKINS: To further invest in Asia in -

BERKOWITZ: Yes.

HAWKINS: - other companies, diversify, or maintain just those two investments?

BERKOWITZ: Well, we’re hoping that we - we want to go slow, because it’s - this is a - this is new for us, and we need to get to know everyone. But, we’re hoping that our first two investments will form the foundation for making more investments.

I mean, our belief is that there is a giant highway being built between China and the United States with - and the traffic is going to go both ways. There’s much to do for everyone, and we would like to be part of that investment process, whether it’s in the United States, in China, and I’m very optimistic about the future there.

And I’m not too much - I’m not that much of an optimistic person, so I’m a - I think there’s some great potential. Will it be rocky? Will it be volatile? Yes, but both countries have a - just a tremendous amount to offer each other.

HAWKINS: Okay. Now, when you got into those two companies and it’s been recent, correct?

BERKOWITZ: Yes.

HAWKINS: In the last -

BERKOWITZ: Yes. This has been a shift for Fairholme. We are not known as international investors, so this was a - this is a major shift for the Fairholme Fund.

HAWKINS: OK. And did you sell what it - did you sell anything? Did you sell out of the US stocks?

BERKOWITZ: No.

HAWKINS: To move into that?

BERKOWITZ: No. No, no. At Fairholme, we tend to keep an awful lot of cash on hand. Right now, we have about $5 billion of cash. So, we - which we’d like to put to work, so we always have cash. We don’t want to run out of cash. The only hedge you have against difficult times is past knowledge and cash.

HAWKINS: OK, because that was the big question is if you were selling US to move into China.

BERKOWITZ: No. It’s not a question of selling US. It’s a question of buying China. And, in fact, many of our companies, you know, whether it’s AIG or Berkshire Hathaway or Citigroup of Morgan Stanley or Goldman Sachs are international. So, we - we’re already there on a look- through basis with our investments in the - especially in the financial services companies, which we have quite amount - a large amount of money in them.

HAWKINS: You’re just getting more deeply involved is what you’re (inaudible)

BERKOWITZ: Yes. And the financial services, that’s the heart of the economy. It’s the - you know, the blood is the credit. I mean, in order for job creation, for our economy to get going, to get to a more normal period, we have to have strong, vibrant financial institutions.

I mean - and Citigroup Global, Goldman Sachs Global, Morgan Stanley, Bank of America, we need these institutions to be strong and to be profitable for the country to do well.

HAWKINS: I know there’s been some investors out there that are bearish on MBIA, but you are not?

BERKOWITZ: Well, we are about 20 percent of MBIA, like the management team, what they are doing now. I mean, MBIA serves a very valuable function in insuring certain bonds and especially when you think about municipal bonds, say, or the state of municipalities. Municipalities, down the road, are going to need MBIA’s insurance guaranty.

Now right now with - the Company is, I think, finishing issues that they’ve had with past issuers. There’s a bunch of lawsuits going on, but that’s all - in my opinion, that’s all going to be cleared up this year. It has to be so everyone can move forward.

And then, you’re going to find an MBIA that is - who kept its word every insured has been paid what they’ve been due. So, what they’ve insured that went bad, the insured’s been paid.

So that’s the franchise value, as far as I’m concerned, and people are going to want that insurance down the road. And MBIA is getting closer and closer to being able to offer that insurance to bondholders again after the last few years.

HAWKINS: Okay. So, you think that they will recover from all that and -

BERKOWITZ: I think they are recovering.

HAWKINS: Yes.

BERKOWITZ: They’re worth significantly more just liquidating and just slowly dying a death, just running off the business, but that’s not going to happen. They’re going to have a vibrant new business, which is going to make them worth that much more.

HAWKINS: What? In their municipal bonds?

BERKOWITZ: Yes, starting there and in other areas down the road.

HAWKINS: Now, I want to talk about Bill Ackman. I know you guys worked together with General Growth, and -

BERKOWITZ: Yes.

HAWKINS: - he has come out and said that he’s bearish, like MBIA.

BERKOWITZ: Well, he was very bearish on MBIA and he was right.

HAWKINS: But, going forward -

BERKOWITZ: Well, the analogy that I use that you - you know years ago, you went to a restaurant and you didn’t like it and new chef comes in, new management comes in, it’s a difference restaurant. You know, you can’t judge the new restaurant by the old restaurant.

So, I think his call on MBIA was right. He was right. That doesn’t mean that companies just continued down that path. Managements change. Times change. You know? Companies do rise from the ashes.

HAWKINS: So going forward, have you talked to Bill Ackman about your MBIA investments?

BERKOWITZ: No.

HAWKINS: Talk about your positions?

BERKOWITZ: No. He’s too eloquent. I’m worried if I talk to him about it he may convince me of something. I - like, no. I think I understand the point of what - you know, a great book was written about it. I’ve read all the books, read all the analyses. I’ve gone through the history.

I’ve known of MBIAs when I’ve made a - I had a - I was a significant investor in MBIA in the late 1990s - excuse me, the late 1980s and the early 1990s when people worried about Philadelphia going bust.

And so, I have a long history of watching the Company and I have a long history of watching the current CEO at the Company and how he has resuscitated other businesses. So, I’ve very optimistic and excited about MBIA. This -

HAWKINS: Especially with the management company that’s (inaudible)

BERKOWITZ: Yes.

HAWKINS: Now going back, we talked about - I had just mentioned General Growth. You just spent a lot of cash selling your stake in General Growth?

BERKOWITZ: Yes. We got some cash and we also were lucky enough to swap some of the General Growth into Brookfield Asset Management. So, we’re very happy with our new investment in Brookfield Asset Management, high-caliber people, great company.

I’ve watched Brookfield Asset Management for decades and never thought I’d every have a chance to be an investor in Brookfield. So, I’m happy we now have a reasonably sized position in Brookfield and, of course, now we have more cash to add to what we are thinking about doing down the road. There’s still lots to do.

HAWKINS: Now, some have said that you’re - some of that cash that you did get from that sale you would use to buy real estate company, St. Joe, and possibly - any thoughts about taking that private?

BERKOWITZ: Well, I have said in the past that I would like to buy the whole company if I could buy the Company. But today, I and my partner, Charlie Fernandez, we are directors of Joe and we have to work in the best interests of all shareholders of St. Joe.

You know, we bought our St. Joe position for pretty much swampland prices, been down there. We like what we see, brand new international airport, and we have plenty of ideas. And we’d like to help our fellow directors and management improve and increase the intrinsic value of St. Joe. And there are decades worth of work at St. Joe.

HAWKINS: So, if possible, you would work with other shareholders to take St. Joe’s offer?

BERKOWITZ: We’re directors of the Company. We take our - we put ourselves in the shoes of all shareholders, and we do what’s best for them long term. So, whatever it takes to make our shareholders money at St. Joe, we’re all for.

HAWKINS: Now one investor, David Einhorn, and you have had opposing views on St. Joe. He has shorted the stock, and he’d said he’s reached out to you but hasn’t heard back. Any - have you talked with him, discussed your views?

BERKOWITZ: I’ve read his analysis, which is quite extensive, and he makes some very good points and I’ve taken them all into account.

HAWKINS: So - but, you haven’t talked with him?

BERKOWITZ: No. Another case, someone quite smart, you know, I don’t want his eloquence to affect my thinking. And he may be right, and I may be right. We both may be right. We’ll see.

HAWKINS: I want to go back real fast to AIG. You have said that you have - were planning on meeting with management. Have you spoken with the management of AIG?

BERKOWITZ: Yes.

HAWKINS: All right.

BERKOWITZ: Yes, we have. And we are in favor of what they’ve done. We applaud what they’ve done, and we’re in favor of what we read in papers of going forward and of the U.S. Treasury’s selling some of their AIG shares at hopefully a nice profit to taxpayers. It looks that way. We’re - anything we can do to help AIG move forward, and they are moving forward.

HAWKINS: And that’s what you’re - some of your discussions were with the backing of this?

BERKOWITZ: Yes. You know, at - we’re - now that - at the Fund we have about 22 - about $22 billion, we need to be long-term shareholders. It’s in our - it’s to our benefit, it’s our advantage to find investments that we can hold for very long periods of time.

So, yes. We want - we want to be with AIG as long as possible, and we want to be with our other investments as long as possible. You know, it’s like it would be nice to take a vacation.

HAWKINS: Well, I do want to point out the former CEO Greenberg told us on Bloomberg a few weeks ago that the asset sales have made the Company weaker. Do you have any thoughts on that?

BERKOWITZ: The asset sales were necessary to repay the taxpayers of the United States. Did they sell valuable assets? Did they - I - yes. Did they receive a good price for those assets? I believe so. But I think, to some extent, it’s a moot point. Of course, I believe so, because one of those assets were AIA and we bought them - we bought it - a large chunk of AIA in the - sorry, I think during its IPO.

Hank Greenberg’s a brilliant man. He’s just - he knows more about insurance. He’s forgotten more about insurance than I know. And it’s - it’s been a difficult - it must be a very difficult process Hank has gone through.

But, the bottom line is that the - you know, the Company, previous times, had a few businesses that maybe were the equivalent of picking up pennies in front of a steamroller.

And the price has been paid, and it’s time to move on and it’s time and - for the Company to rebuild. And that’s what’s happening.

HAWKINS: So, you think that they’re rebuilding it and not open for a debate on this?

BERKOWITZ: No. There are valuable operations in assets that remain at AIG. I just don’t want to tell you what they all are.

HAWKINS: (inaudible) Berkshire Hathaway, do you have any - can you talk about Warren Buffett, any succession plans, any thoughts on succession - successors for Warren Buffett?

BERKOWITZ: Successors - on his succession plans?

HAWKINS: Yes, his successor.

BERKOWITZ: Yes. He is so good at what he does it’s almost insulting to think that he doesn’t have a reasonable succession plan. And I, frankly, don’t see why he should tell anyone. And, even if he did not and this was the end of Berkshire Hathaway, he’s done an outstanding job for people over many decades. Nothing lasts forever.

I hope Berkshire Hathaway lasts forever, but I don’t think Fairholme’s going to last forever. I think - so, I think people - it’s - the succession plan is a bit overblown. I know it’s important, corporate governance, public company.

I understand it, but I don’t think there’s going to be another Warren Buffett. There are great people at the Company, many great people at the Company, and I think shareholders are just going to do fine after Warren Buffett. What more can you ask?

HAWKINS: One more question on Citigroup, they - Company, or the Government just sold Citi warrants. Were you involved in any of that? Did you buy any of those stocks?

BERKOWITZ: No. We were - we weren’t. You know, it’s mutual funds. And on mutual funds, we have limitations about how much of a bank like Citigroup we can have. And we’re right up to the limit, so we’re not allowed to own more than 5 percent of the Fund in a Citigroup, a Morgan Stanley, a Goldman Sachs, Bank of America. And we’re right there with all of them.

HAWKINS: With all of them?

BERKOWITZ: With all of them.

HAWKINS: So, you like - that way my - going to be my next question is whether or not you intend -

BERKOWITZ: I’d buy more if we could.

HAWKINS: Right.

BERKOWITZ: I like the financials. You know, one of the benefits of getting old is that - sort of seeing the certain plays before, not exactly the same. You know, our country’s been through this before. We’re going to get through this again, and you see how it’s - what’s happened in the last few cycles.

And if you study the history, you can get a good sense of, you know, how it plays out in general for the benefit of the country. It must play out for the benefit of the country.

HAWKINS: So, of the financial companies that you - you know, I’ve read that you liked - you - after listening to a call of Brian Moynihan, you liked where he was going. Or, have you -

BERKOWITZ: I think that’s - he’s heading in exactly the right direction. He’s made some painful choices, which are going to - they’re going to be the long-term benefit of Bank of America. When I look at the pieces of Bank of America, whether they are Merrill Lynch and all of the other pieces, it’s just an amazing organization.

And everybody is so focused right now on the liability side of the balance sheet of Bank of America, the reps and warranties with mortgages, and the same is the true of all the other financial institutions that they’re not focused on the asset side and what the potential for these companies will be in a more normal environment.

And we are slowly working towards a more normal environment and, you know, for our shareholders I want them to be part of these companies as they go - enter into this more normal environment.

HAWKINS: Investors love to hear - you know, they like to follow your investment strategies. Are there any investments that you suggest that you’d like? I know you like financials to be specific financial companies. I know you kind of like max out at 5 percent, but then you -

BERKOWITZ: We have $5 billion of cash. I can’t tell you. The shareholders are first. Owners always come first. You have to respect the people that brought you to the party, and we have a great shareholder base that stuck with us and I am never going to ever say anything to anyone that could potentially hurt our performance for those shareholders. So, all I can tell you is stay tuned.

HAWKINS: Any - but, you will - you do want to put some of that cash to work? You do want to -

BERKOWITZ: Yes.

HAWKINS: Yes. So, you’re looking at -

BERKOWITZ: We will put the cash to work.

HAWKINS: - to use outside financial? Nothing?

BERKOWITZ: Sorry.

http://www.bloomberg.com/news/2011-02-01/berkowitz-says-he-s-all-in-on-aig-transcript-.html?cmpid=yhoo

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UPDATE 2-NY court dismisses MBIA fraud case against Merrill
By Jonathan Stempel
Reuters
Feb 1, 2011
NEW YORK



A New York state appeals court on Tuesday dismissed a lawsuit in which bond insurer MBIA Inc (MBI.N) accused Merrill Lynch & Co of fraudulently misleading it into providing insurance on $5.7 billion of risky debt.

* Credit default swaps underlay $5.7 bln debt

* Appeals court said plaintiffs understood the risks (New throughout, adds byline)

The ruling is a setback for MBIA, whose 2009 restructuring is also being challenged in the New York courts. It came in one of many cases accusing banks of misleading investors about the safety of complex debt packaged into securities that plunged in value after the credit crisis struck in 2007.

MBIA had been the largest U.S. bond insurer before piling up large losses from insuring mortgages and other debt that proved to be toxic. Merrill's exposure to similar debt led to its January 2009 takeover by Bank of America Corp (BAC.N).

In Tuesday's ruling, the New York State Appellate Division in Manhattan dismissed the last of six claims brought by Armonk, New York-based MBIA and co-plaintiff LaCrosse Financial Products LLC over transactions dating from 2006 and 2007.

According to court papers, MBIA had provided insurance on credit default swaps that LaCrosse sold Merrill in connection with $5.7 billion of collateralized debt obligations.

The complaint said that while MBIA does not have a direct ownership stake in New York-based LaCrosse, it is consolidated in MBIA's financial statements on the basis that MBIA guarantees LaCrosse's obligations under credit default swaps.

The plaintiffs accused Merrill of fraudulently overstating the quality of the underlying securities, including that they were "triple-A" rated, as part of a scheme to "offload billions of dollars" of subprime mortgages and other risky debt.

Merrill countered that the plaintiffs suffered from a "classic case of buyer's remorse" and should not recover.

A lower court judge last April dismissed the plaintiffs' case apart from a breach of contract claim.

But in Tuesday's ruling, a five-justice appeals court panel unanimously dismissed that claim as well.

The panel said the plaintiffs' "level of sophistication," together with "specific disclaimers in the contracts" did not excuse their having failed to uncover the risks sooner.

It also said Merrill fulfilled its obligation to provide "triple-A"-rated securities, even if some of them may have been downgraded later.

Philippe Selendy, a lawyer for MBIA and LaCrosse, did not immediately return a call seeking a comment.

Bank of America spokesman Bill Halldin said the bank is pleased with the ruling.

MBIA's 2009 restructuring overseen by New York's insurance superintendent at the time, Eric Dinallo, split its municipal bond business from its structured finance operations.

A group of banks challenged the split, saying it left the company's insurance unit undercapitalized and unable to pay out on their claims. New York's highest court, the Court of Appeals, will consider some of the banks' arguments this year.

The case is MBIA Insurance Corp et al v. Merrill Lynch et al, New York State Appellate Division, 1st Department, No. 4163.

http://www.reuters.com/article/2011/02/01/bankofamerica-merrill-mbia-cdos-idUSN0110552320110201?feedType=RSS&feedName=bondsNews&rpc=43

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Judge Denies Countrywide Motion to Compel Documents From MBIA
Karen Freifeld and Patricia Hurtado
Bloomberg.com
Jan 28, 2011

A New York state judge denied a motion by Bank of America Corp.’s Countrywide unit to compel the disclosure of documents by bond insurer MBIA Insurance Corp.

http://www.bloomberg.com/news/2011-01-28/judge-denies-countrywide-motion-to-compel-documents-from-mbia.html?cmpid=yhoo

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U.S. regulator struggles to gain faulty mortgage info
Al Yoon
Reuters
NEW YORK
Jan 28, 2011

Fannie Mae's and Freddie Mac's effort to challenge the quality of the riskiest mortgage bonds they own is proving a tough slog despite the power of their federal regulator, according to sources close to the banks and regulator.

Nothing has been heard from the regulator, the Federal Housing Finance Agency, on 64 subpoenas it issued banks in July for detailed information on subprime and other Wall Street mortgage bonds purchased by the U.S. home loan giants at the peak of the housing market.

The delays are fueling suspenseful buzz among investors, who are hoping the top housing regulator's investigation will help jump start their efforts to prove fault on private-label mortgage securities. Just 20 percent of the information requested by the FHFA has been delivered, with some banks resisting the regulator's demands, one source said.

Should the FHFA find fault on the securities it would increase pressure on banks to buy back bad mortgages which could result in $90 billion in losses, according to analysts.

"There are people looking at the success the FHFA has in getting the information," said Scott Buchta, head of investment strategy at Braver Stern Securities in Chicago. "There's so many people trying to get through the fortress. Once someone gets through the wall, others may pile on."

Investors have been looking for Fannie Mae and Freddie Mac -- powerful investors themselves with leverage over banks -- to make inroads with trustees in charge of overseeing bond issues, including release of information. The two owned nearly $150 billion of the bonds as of September, mostly by Freddie Mac.

In dispute are "representations and warranties," or contractual statements of loan quality. Violations, from home occupancy and appraisal errors to outright fraud, are at the root of a growing investor movement to hold banks accountable for losses, which for Fannie Mae and Freddie Mac have been largely borne by U.S. taxpayers.

Investor outrage has sparked several lawsuits against banks, including those by bond insurer MBIA Inc and some Federal Home Loan Banks. Many more are expected.

Getting loan data is only the first step. But trustees have been a hurdle to investors, claiming contracts that govern the securities prevent them from taking action without evidence of reason, and a mandate from 25 percent of trust owners.

"Slowly, information is coming out, and none is positive for banks," said Bill Frey, president of Greenwich Financial Services. Banks are stalling, he said.

Fannie Mae and Freddie Mac have been more successful in getting banks to buy back loans sold into government-backed securitizations, where they have unique control. They have received $20.9 billion in repurchase proceeds in the 44 months through August, or about 60 percent of what was requested, a government report said on Thursday.

Sources with a bank and a servicer say the FHFA requests on private mortgage bonds are vast, including data on origination, servicing and related e-mails. Some data could violate consumer privacy acts, and has to be scrubbed, delaying response time, the sources said.

"It's a lot of documentation that is a burden to get together, given the volume of loans the banks have" with Fannie Mae and Freddie Mac, said a lawyer working with a subpoena.

FHFA, Freddie Mac and Fannie Mae spokesmen declined to comment on the subpoenas.

OTHER INVESTORS

nvestors in the past year have begun to make some inroads on their own, emboldened in late 2010 by revelations of faulty bank foreclosure practices. In a separate tack, Freddie Mac has partnered with bond giant PIMCO and other to fight for Countrywide loan repurchases by Bank of America, which last month announced a "constructive dialogue" was underway.

Elsewhere, Deutsche Bank AG is fighting JPMorgan Chase & Co to provide more than 500,000 loan files for a group investors that own 99 bonds with mortgages from failed lender Washington Mutual. JPMorgan and the Federal Deposit Insurance Corp. as WaMu's receiver asked the court to dismiss the case, drawing a memorandum of dispute this month by Deutsche Bank lawyers, including Talcott Franklin.

Franklin first made a splash last year by rallying at least 125 investors to pool efforts to force trustees to scrutinize loans and servicing practices, and to pursue loan "put-backs." Investors in Franklin's RMBS Clearinghouse have ownership in more than a third of the $1.5 trillion RMBS market, and voting rights on some 2,600 mortgage trusts.

"I think you'll definitely start to see some action there," said William Callan, president of Declaration Management & Research, a manager of $11 billion in assets and part of Franklin's clearinghouse.

http://www.reuters.com/article/2011/01/28/us-mortgages-regulation-subpoenas-idUSTRE70R70620110128?pageNumber=2

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NY Legislators Set Hearing On Bond Insurance Fraud
Ben Berkowitz
Reuters
Jan 27, 2011

New York legislators have set a hearing for mid-February on the relationship between financial companies and bond insurers, and whether the insurers may have been defrauded by banks selling structured financial products.

An aide to Joseph Morelle, chairman of the state Assembly's insurance committee, said on Thursday the hearing would be held in New York City on Feb. 16.

The hearing is to investigate whether any of the insurers were deceived about the quality of the bonds they were insuring. The voluntary invitation list has not been finalized, so it was not clear who would participate, Morelle said.

The bond insurance industry, which once stuck solely to underwriting debt sales by local governments, was decimated by exposure to mortgage-backed securities and other structured products during the financial crisis.

Many insurers ended up in rehabilitation or bankruptcy, and the few left operating have diminished credit ratings and are writing relatively little business.

The two largest bond insurers still operating and seeking new municipal bond business are MBIA Inc (MBI.N) and Assured Guaranty Ltd (AGO.N).


http://www.reuters.com/article/2011/01/27/insurance-bonds-idUSN2726026420110127?feedType=RSS&feedName=financialsSector&rpc=43

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The Death Knell for Insured Muni Bonds?
George Fisher
January 27, 2011

The municipal bond markets were hit with two revelations this week that won’t help muni bond investors. Standard & Poor’s is proposing changes to its credit rating procedures for bond insurers, and there appears to be massive lack of financial reporting by municipalities to their bondholders. These seem to go hand in hand, adding risk to an already shaky muni bond market.

Bloomberg reported that S&P will be increasing its capital requirements or requiring offsetting lower risk exposure for bond insurers to maintain their ratings. The biggest change is a new leverage test to measure the amount of risk relative to its capital reserves that the insurer is accepting by guaranteeing debt. To achieve a AAA rating, bond insurers will either have to increase capital reserves or reduce their risk exposure. According to S&P, the level of reserves needed to achieve a “high investment-grade ratings will increase significantly under the proposed criteria because of higher capital charges used in scoring capital and the new leverage test."

Bond insurers agree to pay both principal and interest in the event of an issuer default. Prior to the credit problems in 2008, underwriting muni bonds was a $2.3 trillion business that offered a credit-rating boost to issuers that didn’t have AAA ratings.

In the wake of the financial crisis in 2008, rating agencies have been revamping their criteria, and this is the latest move to tighten their requirements to receive the highest ratings. Of the big three bond insurers, Assured Guaranty (AGO), MBIA (MBI) and Ambac (ABK), only Assured Guaranty has been able to maintain its rating, with the creditworthiness of the other two falling below “A” investment grade. In October, S&P lowered Assured Guaranty's rating to AA+, while MBIA’s National Public Finance Guarantee Corp. is currently rated BBB, the lowest tier of investment grade, and Ambac is in bankruptcy.

In late 2007, Berkshire Hathaway (BRK.B) dipped its toe in the muni bond insurance business, only to withdraw less than 18 months later. In announcing the departure in February 2009, chairman Warren Buffett told investors that insuring muni debt is “a dangerous business."

The Wall Street Journal has reported a growing lack of financial disclosure by states and municipalities that is leaving muni bond investors in the dark concerning the financial health of their investments:

At the request of The Wall Street Journal, DPC Data Inc., a specialist in municipal disclosure, did an extensive analysis of disclosure and found the problem growing since a 2008 study. Of 17,000 bond issues it studied, more than 56% filed no financial statements in any given year between 2005 and 2009. More than one-third of borrowers entirely skipped three or more years, and the number grew to 40% in 2009, as credit woes mounted. Another 30% filed extraordinarily late in 2009. "This works out to insufficient ongoing disclosure information for more than $2 trillion of the $3 trillion in outstanding bonds," says Peter Schmitt, chief executive of DPC of Fort Lee, N.J.

The rampant lack of current official filings reflects a broader disclosure problem. Many cities, states, hospitals and other public borrowers don't make general financial records accessible, investors and regulators say, and if they do, they are often so confusing or spotty that even professionals can't make sense of them.

An example used in the article asserts that for 10 years the Clay Gas & Utility District of Clay County, Tenn. didn't file financial statements or disclosures until November of last year, when it announced it didn't expect to make future payments on its muni debt.

The SEC is investigating Illinois pension funds for lack of disclosure, and has settled a similar New Jersey case where the state failed to provide bond investors full disclosure of its oversized pension obligations.

Below is a graph depicting the number of municipalities that have failed to provide financial disclosures:




The question now facing muni bonds investors is twofold:

1. Will insured muni bonds continue to be offered, backed by an investment grade bond insurer that has the financial strength to make good on those policies if the issuer defaults?
2. Will investors have the necessary financial disclosures to evaluate if their muni bond investments are still “safe”?

Usually, investors are willing to accept a lower interest coupon if the muni bond is insured against default. If the bond insurance business dries up and muni bonds are no longer offered as “insured,” interest rates paid by municipalities and states will rise due to a higher perceived risk, adding pressure to their already shaky finances.
Time will tell, and muni bond investors should keep a close eye on these developments.

http://seekingalpha.com/article/249121-the-death-knell-for-insured-muni-bonds?source=yahoo

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MBIA Opposes Expedited Hearing by NY Top Court in Banks’ Suit
Shannon D. Harrington and Karen Freifeld
BloombergNews.com
Jan 25, 2011

MBIA Inc. said it opposes an expedited hearing by New York’s top court of an appeal by banks including Bank of America Corp. and UBS AG of the dismissal of a court challenge to MBIA’s 2009 restructuring.

http://www.bloomberg.com/news/2011-01-25/mbia-opposes-expedited-hearing-by-ny-top-court-in-banks-suit.html?cmpid=yhoo

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MBIA in Court News
Elizabeth Amon
BloombergNews.com
Jan 24, 2011

Banks Appeal Dismissal of MBIA Restructuring Lawsuit

UBS AG, Bank of America Corp. and more than a dozen other banks asked New York’s highest court to reverse a lower court ruling that threw out their lawsuit against MBIA Inc. that challenged its restructuring.

MBIA won dismissal Jan. 11 of a lawsuit by banks including Citibank NA and Royal Bank of Scotland Plc that claimed the bond insurer’s split into two units was intended to defraud policyholders. MBIA climbed to its highest level since September 2008 on news of the dismissal by the state’s Appellate Division.

The banks said in their notice of appeal, filed Jan. 20 in state trial court, that they are challenging “each and every part of the order” by the Appellate Division.

The banks claimed the restructuring, approved by New York’s insurance department in 2009, transferred $5 billion in cash and securities out of MBIA’s primary operating unit, MBIA Insurance, to another entity now known as National Public Finance Guarantee Corp., according to the complaint.

The move meant MBIA Insurance Corp. wouldn’t be able meet future obligations to holders of financial-guarantee insurance policies, the banks said.

A five-judge appellate panel dismissed the suit in a 3-2 decision.

Marc Kasowitz, an attorney for MBIA, didn’t return a call seeking comment. On Jan. 11, he said he was confident the restructuring would be upheld. New York law gives decisions by state agencies such as the insurance department “great deference and great weight,” Kasowitz said in an interview on Bloomberg Television.

The case is ABN Amro Bank NV v. MBIA Inc., 601475-2009, New York State Supreme Court (Manhattan).

http://www.bloomberg.com/news/2011-01-24/jpmorgan-ubs-lehman-mbia-tcw-rbs-messier-in-court-news.html?cmpid=yhoo

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Are Pensions the Cause of States' Problems?
Zacks.com
January 11, 2011

It is no secret that many of the State and Local governments are in severe fiscal trouble. In addition to the current difficulties, many are worried about the long-term implications of severely underfunded pension liabilities.

This has led many to place the blame for the states' fiscal position almost entirely at the feet of the schoolteachers, firemen, police, social workers, prison guards and other people who work for state and local governments. More specifically, “overly generous pension plans are said to be the cause of the State’s fiscal problems, rather than, say, the failure of State governments to make the contributions into the pension funds over time (or the failure to tax their citizens at high enough rates to generate the funds needed for the services people want from state and local governments).

Without a doubt, the defined benefit pensions that State and Local employees get are better than those that most in the private sector get, because a private sector defined benefit pension is a real rarity these days and is getting rarer. In the private sector, it is usually industries that are significantly unionized that get them, and there are fewer and fewer of those private-sector unionized jobs these days.

People want their politicians to be “tough on crime and pass laws that require long prison sentences (i.e. "three strikes and you're out" laws), but forget that it costs more to keep a person in prison for a year that to send him to college for a year. Prison guards voluntarily go to prison every day, and the job is often very dangerous, yet people are aghast at the thought that they might make a middle class income and be able to retire before they reach age 65.

Are Retirees Bankrupting the System?

While clearly there are cases where pensions get inflated by allowing people to take massive amounts of overtime in the years just before they retire (and thus increase the base on which the retirement amounts are based), from reading much of the media one would think that your average state worker was calling it quits at age 40 with a secure retirement income well into the six figures. That really is not the case.

California is often held up as the poster child of a state where pension costs have spun out of control and resulted in a nearly bankrupt state government. So what are the facts about how much California State and Local government workers get when they retire? CalPERS is the largest State pension fund in the nation and is responsible for almost all of the pensions in the State. Here is what it has to say on the matter:

“About 25,000 CalPERS members retire each year. The average CalPERS member receives a monthly benefit allowance of $1,881 after retiring at age 60 with 19.9 years of service (service retirement). The average California Highway Patrol employee receives a monthly allowance of $4,280 after retiring at age 55 with 28 years of service. Approximately 41 percent of CalPERS retirees receive $12,000 per year or less in benefits. About 81 percent of retirees receive $36,000 per year or less, with 91 percent of CalPERS retirees receiving $54,000 or less per year.

"The vast majority of recent State retirement cost increases are due to market downturn, not to increased benefits. Nearly 80 percent of the increase in employer rates from 2002-04 was due to the two-year downturn in the economy that produced negative investment returns. As a percent of payroll, the State pays less per employee than it did 25 years ago for school employees, state miscellaneous employees, state industrial workers, state safety workers and state peace officer and firefighters.

Is There Another Possible Reason?

Perhaps, just perhaps, these workers are being made into scapegoats for problems they didn’t cause. State and Local pension funds are large institutional investors, and like most large institutional investors, they lost a lot of money during the financial meltdown. Some but not all of that has been recovered as the market has bounced back over the last two years.

However, not all the funds were in equities, and many of the state funds had large portfolios of the toxic mortgages that Wall Street was peddling during the housing boom. In 2010, the Wall Street Bonus pool reached $142 billion, or roughly 1% of GDP. To be fair, that is a worldwide total and many of the big Wall Street firms like Goldman Sachs (NYSE: GS - News) and JPMorgan (NYSE: JPM - News) are global operations.

That implies that lots of people on Wall Street are getting bonuses for a single year that are greater than an a retiree in the 10% highest percentile will receive in a lifetime.

I think it is going to be a rough year for the State and Local governments, especially now that the Federal help that has sustained them (a big part of the ARRA or Stimulus act) is drying up. It used to be that many municipal bonds were guaranteed by the likes of MBIA (NYSE: MBI - News), but investors should now count that insurance as worthless -- with the possible exception of muni’s guaranteed by Berkshire Hathaway (Boston: BRK-A - News) -- as the insurance companies are most likely insolvent (Ambac is already in bankruptcy). I would tend to avoid municipal bonds and stick instead with dividend-paying stocks for income.

http://finance.yahoo.com/news/Are-Pensions-the-Cause-of-zacks-594748065.html?x=0&.v=1

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UBS, Bank of America Appeal Dismissal of MBIA Suit
Karen Freifeld and Shannon D. Harrington
Jan 21, 2011

UBS AG, Bank of America Corp. and more than a dozen other banks appealed to New York’s highest court to reverse a lower court ruling that threw out their lawsuit against MBIA Inc. that challenged its restructuring.

MBIA won dismissal Jan. 11 of a lawsuit by banks including Citibank NA and Royal Bank of Scotland Plc that claimed the bond insurer’s split into two units was intended to defraud policyholders. MBIA climbed to its highest level since September 2008 on news of the dismissal by the state’s Appellate Division.

The banks said in their notice of appeal, filed yesterday in state trial court, that they are challenging “each and every part of the order” by the Appellate Division.

The banks claim the restructuring, approved by New York’s insurance department in 2009, transferred $5 billion in cash and securities out of MBIA’s primary operating unit, MBIA Insurance Corp., to another entity now known as National Public Finance Guarantee Corp., according to the complaint.

The move meant MBIA Insurance wouldn’t be able to meet future obligations to holders of financial-guarantee insurance policies, the banks said.

A five-judge appellate panel dismissed the suit in a 3-2 decision.

Expedited Appeal Request

“We are confident that the Appellate Division’s decision will be affirmed by the Court of Appeals,” Marc Kasowitz, an attorney for MBIA, said in an interview today.

In a letter to the Court of Appeals, Sullivan & Cromwell LLP lawyer Robert Giuffra Jr., who represents the banks, requested an expedited appeal.

“MBIA Insurance’s liquidity is evaporating,” Giuffra wrote, according to a copy of the letter provided by Sullivan & Cromwell at Bloomberg’s request.

The unit paid out more than $4.8 billion in gross loss payments during 2009 and the first three quarters of 2010, while total cash and invested assets declined by $2.1 billion, Giuffra said in the letter. The unit had $795 million of cash and cash equivalents as of Sept. 30, he said, citing a third-quarter 2010 New York Insurance Department statement. MBIA sold its headquarters in March “presumably to raise cash,” he said.

Kevin Brown, a spokesman for MBIA, said in an e-mailed statement, that “the banks have been maintaining that MBIA Insurance Corp. has been on the verge of imminent financial collapse since shortly after our transformation.

‘Meritless’ Argument

“Their argument continues to be meritless, as almost two years later we remain solvent and continue to pay all claims and obligations as they come due,” Brown said. “As of September 30, 2010, MBIA Insurance Corp. had statutory capital of $3.1 billion and a $2.0 billion liquidity position, which includes $844 million of highly liquid assets.”

Kasowitz, the MBIA lawyer, added there was “no valid reason” to expedite the appeal.

“The banks’ proposed schedule is seeking to cut in half the amount of time that the rules provide for appeals to the Court of Appeals,” he said. “There is no reason to depart from those rules and shortcut the briefing on these issues.”

Gary Spencer, a spokesman for the state Court of Appeals, said the court was not averse to granting calendar preference if a party could show “substantive need,” though it had to be balanced with the possible prejudice to the other party.

Spencer said the average period from the filing of notice to putting on the calendar for oral argument is about seven and a half months.

Two Lawsuits

The lawsuit is one of two that banks filed to challenge the split. The second, brought under New York state’s Article 78 statute, which asks the court to review a state administrative decision, has yet to be resolved.

Kasowitz said the Article 78 suit, which has been going on for a year and a half, was “the only proper forum” to challenge the superintendent of insurance’s approval of the restructuring.

The litigation has thwarted MBIA Chief Executive Officer Jay Brown’s efforts to reenter the business of guaranteeing state and municipal government bonds. The insurer was shut out after losing its top rankings in 2008 over losses on subprime mortgage debt it guaranteed. The restructuring in 2009 split the municipal bond policies from its guarantees on mortgage debt and other securities.

Cut Ratings

Standard & Poor’s last month cut its ratings on both insurance units and the holding company because of “significantly higher” projections of potential losses from residential and commercial mortgage debt. S&P downgraded the National Public Finance unit because of the “risk that the two companies could be required to be recombined or that National would be required to bolster MBIA Insurance’s capital,” the analysts said in a Dec. 22 statement.

MBIA rose 18 cents, or 1.5 percent, to $12.51 as of 4 p.m. in New York Stock Exchange composite trading today.

http://www.bloomberg.com/news/2011-01-21/banks-appeal-mbia-decision-dismissing-restructuring-litigation.html?cmpid=yhoo

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BofA Says $10 Billion Is Top of Forecast for More Mortgage-Buyback Costs
Andrew Frye
Jan 21, 2011

Bank of America Corp., which set aside $4.1 billion in the fourth quarter to resolve disputes over faulty mortgages, said it could cost as much as $7 billion to $10 billion more to resolve outstanding claims.

The forecast represents the “upper range” of future losses tied to bond insurers and private investors, the Charlotte, North Carolina-based bank said today in a slide presentation. The actual cost may depend on “legal and procedural hurdles” facing firms who want the bank to repurchase home loans it originated, Chief Financial Officer Charles Noski told analysts in a conference call.

Bank of America, the biggest U.S. bank by assets, has been battling accusations that mortgage investors were duped into buying loans issued with overstated property values and inflated borrowers’ incomes. Noski said the size of the provision was appropriate after Betsy Graseck, an analyst at Morgan Stanley, asked why the company didn’t set aside more for reserves, given the forecast range.

“This is a possible range, not a probable range,” Noski said. The future loss “could be as low as zero, theoretically, up to a high end of the range that we think could be $7 billion to $10 billion, based upon an array of different assumptions.”

The $4.1 billion provision drove a fourth-quarter loss and exceeded the $3 billion that the lender said on Jan. 3 would be needed for the period to settle disputes with U.S.-owned mortgage finance companies Fannie Mae and Freddie Mac. Resolving private-market demands, which include claims from mortgage investors and from bond insurers that issued coverage tied to the bank’s loans, will probably be “a protracted process which could take years to conclude,” Noski said.

Bond Insurers

Outstanding claims from bond insurers rose to $4.8 billion as of Dec. 31 from $4.3 billion on Sept. 30. Claims from investors other than U.S.-owned firms and bond insurers climbed 68 percent to $3.07 billion. The bank has said some of the losses suffered by its counterparties are the result of the economy rather than underwriting inaccuracies.

Demands from so-called monoline bond insurers “continue to grow as the monolines continue to submit claims and are generally unwilling to withdraw claims despite evidence refuting the claims,” Bank of America said in the slide presentation.

Outstanding demands from government sponsored enterprises declined 59 percent to $2.82 billion on the settlements with Fannie Mae and Freddie Mac.

“That we put behind us,” Chief Executive Officer Brian T. Moynihan said of the Fannie Mae and Freddie Mac claims on Bloomberg Television’s “InsideTrack with Deirdre Bolton & Erik Schatzker.” Demands from private investors and bond insurers will be dealt with in coming quarters, he said.

‘Shareholder Interest’

“Our best guess is this will take a longer period of time, perhaps a few years,” Moynihan said on the conference call. “We’re going to continue to make progress only if we can do it on a basis consistent with our shareholder interest.”

The bank today posted a fourth-quarter net loss of $1.24 billion. The company dropped 29 cents, or 2 percent, to $14.25 at 4 p.m. in New York Stock Exchange composite trading.

Overall, new claims in the quarter were $5.75 billion. Bank of America approved purchases of $3.93 billion, and $4.11 billion in claims were rescinded. The bank had agreed to repurchases of $1.01 billion in the third quarter and $1.29 billion in the last three months of 2009.

In the last three months of 2010, buyback claims on loans made after 2008 were $105 million, or 1.8 percent of all new repurchase demands. That compares with $56 million, or 1.3 percent of the total, in the third quarter and $20 million, or 0.9 percent, in the final three months of 2009.

‘Hand-to-Hand Combat’

Moynihan said in November the bank would engage in “hand- to-hand combat” to fend off unwarranted demands for compensation from mortgage investors and insurers that sold coverage on securities tied to the firm’s loans. Bank of America, the second-largest U.S. mortgage originator after Wells Fargo & Co., said on Jan. 3 that it had received $21.6 billion in demands from Fannie Mae and Freddie Mac to repurchase soured home loans that were issued from 2004 to 2008.

JPMorgan Chase & Co., the No. 2 U.S. bank, put $1.5 billion in litigation reserves in the fourth quarter, predominantly for costs tied to buybacks. Wells Fargo set aside $464 million of provisions in the last three months of the year for repurchases. JPMorgan CEO Jamie Dimon called the outlook for litigation “a long, ugly mess” and said most new reserves were for private- label claims, which don’t involve Fannie Mae or Freddie Mac.

“We will be talking about this for every quarter over the next three years,” Dimon told analysts on a conference call on Jan. 14.

http://www.bloomberg.com/news/2011-01-21/bofa-mortgage-buyback-provision-surges-as-bond-insurers-press-for-refunds.html?cmpid=yhoo

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Bondholders, Unions In High-Stakes Battle Over State Bankruptcy
Daniel Fisher
Forbes.com
Jan. 21 2011

The oddly passive headline on the New York Times Page One story today (“A Path Is Sought For States To Escape Their Debt Burdens“) obscures a very active behind-the-scenes battle in Washington. On one side are representatives of the municipal bond community, who fret about being second in line behind unionized employees when states have to choose between paying debt interest or their ballooning retirement-benefit bills. On the other side are union reps, who have fought hard to win legislation in all 50 states granting them special protection from raids on their retirement funds.

According to this GAO report, nine states including Illinois and New York, even provide constitutional guarantees of vested benefits. Congress could monkey with that scheme through bankruptcy law, however, something it has done repeatedly to protect the interest of other special creditors including student lenders and landlords.

Hence the backroom struggle over potential federal legislation to allow states to modify those benefits. It came to widespread public attention after University of Pennsylvania expert David Skeel broached it in this Slate article in November.

A source in the bankruptcy world tells me the Times article today mostly reflects the dreams of muni-bond types, who have been chatting with Congress about a law that would protect them from state defaults. AFSCME, the 1.6 million-member public employee union, doesn’t think that’s such a good idea. “They are readying a massive assault on us,” says Charles M. Loveless, AFSCME’s legislative director, in the Times article.

It wouldn’t be unusual for Congress to step in and decide which creditors take priority when an entity can’t pay its bills. They’ve done that already with the bankruptcy code. My guide to the world of court-overseen reorganizations ticks off the special beneficiaries so far:

- Student lenders. “A student loan is a life sentence,” this person says, almost impossible to discharge absent a tough-to-prove hardship.

- Utilities. They get paid before, during, and after a company goes into reorganization, unlike other unsecured creditors and even lawyers.

- Lawyers. They can be paid a lump sum up front, but in big, complex bankruptcies they’re often working “for free” at the end. OK, maybe not for free, but the court isn’t authorizing their bills.

- Derivatives dealers. To protect the integrity of the markets or some such logic, they get to grab their collateral when a counterparty gets in trouble. Think Goldman vs. AIG.

- Retirees. Companies can break most agreements to provide retiree health benefits at will — until they go into bankruptcy. Then they have to honor them until they get out.

- Landlords. Bankruptcy law requires debtors to keep up with their lease payments (but the landlord also is prohibited from evicting them).

With all these exceptions riddling the bankruptcy code, it’s no wonder lawyers and lobbyists are suiting up for the mother of all exceptions. The undeclared civil war between taxpayers and bondholders on one side, and municipal employees on the other, is entering a new phase.


http://blogs.forbes.com/danielfisher/2011/01/21/bondholders-unions-in-high-stakes-battle-over-state-bankruptcy/?partner=yahootix

[nlightn]

Mortgage Woes Weigh on Bank of America
Dan Freed
TheStreet
01/21/11
NEW YORK

Bank of America(BAC_)'s fourth quarter earnings were dominated by costs from mortgage disputes, as the sheer weight of the problem made it difficult to assess the strength of the bank's ongoing businesses.

Bank of America reported a fourth-quarter net loss of $1.2 billion, or 16 cents a share, compared with a year-earlier loss of $194 million, or 60 cents a share.

Analysts had been expecting a $3 billion charge due to a settlement with government sponsored entities (GSEs) Fannie Mae (FNMA.OB)and Freddie Mac(FMCC.OB) over mortgage "putbacks," and a $2 billion "goodwill impairment charge" related to Bank of America's mortgage business, both of which were previously announced by the bank.

However, some may have been caught off guard by a $2 billion, or 12%, rise in non-interest expenses versus the third quarter. That included a $1 billion rise in litigation costs versus the previous quarter. Bank of America also spent $630 million more than the past quarter on personnel issues, including hiring and severance expenses, as well as professional fees.

While some of this was growth-related, much of the expenses went to cleaning up the mortgage-related mess, and bank executives said these expenses are likely to "remain evelvated" in 2011.

Analysts and investors are eager to determine the likely exposure of Bank of America to disputes over "private label" mortgage securities, including litigation with monoline insurers such as MBIA(MBI_), Ambac and Assured Guaranty(AGO_).

Bank of America CFO Charles Noski said losses from those exposures could be as high as $7 billion to $10 billion before taxes, and another bank executive later on during the post-earnings conference call with analysts said they were "probably more than zero." Bank executives confirmed the losses are tax-deductible and stressed they may take years to determine.

Bank of America's main businesses appeared roughly in line with that of rivals, marked by improvement in investment management and consumer credit-oriented areas, as well as investment banking, but weakness in trading, particularly for fixed income.

Bank of America's fixed income currency and commodity (FICC) revenues of $1.8 billion were down 49% from the third quarter, "with lower results in credit, rates and commodities products," Noski said. He attributed the weakness partly to "seasonal" issues--the fourth quarter is traditionally the weakest--though he said a difficult market was also a major factor.

http://www.thestreet.com/_yahoo/story/10981595/1/mortgage-woes-weigh-on-bank-of-america.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

[nlightn]

Risk Board, Asset-Backed Bonds, SEC: Compliance
Carla Main
Jan 21, 2011

The European Systemic Risk Board, Europe’s new 65-member risk watchdog, met for the first time in Frankfurt yesterday amid economists’ and analysts’ doubts about how well it could avert the region’s next financial crisis.

The ESRB, which aims to identify and warn of brewing risks in the financial system, may fail to prevent future imbalances as it doesn’t have any legal power to enforce action, according to economists at ING Group, Barclays Capital and ABN Amro.

The European Union is trying to avoid a repeat of the financial crisis that followed the 2008 collapse of Lehman Brothers Holdings Inc. and resulted in European governments setting aside more than $5 trillion to support banks. Part of a wider regulatory overhaul, the ESRB is similar to the Financial Stability Oversight Council in the U.S.

The ESRB is chaired by European Central Bank President Jean-Claude Trichet, with Bank of England Governor Mervyn King acting as vice chairman.

Trichet said at a joint press conference with King in Frankfurt yesterday that while the board can only do as much as the legislation asks it to, it has “a lot of moral authority” and will employ a strategy of “comply or explain.”

It can pass on matters to the heads of European governments if its warnings aren’t heeded.

Some analysts say the ESRB’s advice will be hard to ignore. While the body will monitor macro-prudential risks, it may turn its attention to single institutions deemed systemically important. It has yet to identify those institutions or say what methodology it will use in its risk analysis.



Compliance Policy

Dodd-Frank Spurs Hundreds of Regulations, Increased Lobbying

Federal agencies are now writing at least 330 new rules governing everything from derivatives trading to the mortgage industry, implementing the broad outlines established by the Dodd-Frank law in July.

Decisions being made at the Securities and Exchange Commission, the Federal Reserve, and other agencies will not just ordain how companies must act. They also will determine which ones are dealt into moneymaking opportunities created by Dodd-Frank -- and which are shut out.

In addition to writing the Dodd-Frank rules this year, regulators will launch 122 oversight panels and offices required by the law, according to an analysis by Bloomberg Government. They range from a federal insurance office at the Treasury Dept. to an office overseeing credit ratings at the SEC. As these entities are formed and staffed, they will provide businesses with opportunities to influence the rules controlling their industries.

Financial firms such as Wells Fargo & Co., one of the nation’s largest mortgage lenders, are already attempting to use the new regulatory system to gain a competitive advantage.

Regulators, who face a July deadline for writing many of the rules, are getting some political pressure to slow down. Republicans regained a majority in the House of Representatives this year and have vowed to repeal some Dodd-Frank provisions or cut funding for regulators such as the SEC.

Their power to do that will be limited because Democrats still control the White House and the Senate.



Fed Abandons Plan to Curb Borrower Rights to Rescind Mortgages

The Federal Reserve Board abandoned plans to curb homeowners’ right to invalidate loans based on flawed documents.

Leonard Chanin, the deputy director of the Fed’s division of consumer and community affairs, told a meeting of the American Bar Association on Jan. 10 in Naples, Florida, that the Fed would hold off on changes to borrowers’ “right of rescission.” Instead, he said, the new Bureau of Consumer Financial Protection would assume responsibility for the issue later this year, according to two people present at the meeting.

Jeffrey Naimon, an attorney with the law firm BuckleySandler LLP in Washington, said Chanin left little doubt the Fed wouldn’t move any further with the rule, which it proposed in September. He described Chanin’s statement as an “announcement.”

Fed spokeswoman Susan Stawick declined a request for comment by e-mail.

The proposal to revoke the rescission right, which comes from the Truth in Lending Law, drew a vociferous response from consumer groups, which charged that the Fed was taking away one of the few tools borrowers can use to slow down or halt unfair foreclosures.

The Fed currently writes regulations related to the law. This power is scheduled to shift to the consumer bureau in July.

FSA Studying Aid for Japan Firms Facing Yen Swap Loss

Japan’s Financial Services Agency said it is examining ways to help small businesses cope with losses on foreign-exchange derivatives, after the yen climbed 15 percent against the dollar last year.

The financial watchdog is talking with officials from commercial banks to study what measures can be taken, Shozaburo Jimi, the minister in charge of the agency, said at a news briefing in Tokyo today. Banks sell derivatives to help companies hedge against fluctuations in currency values.

Corporate bankruptcies related to the yen’s appreciation more than tripled to 75 in 2010 from 22 a year earlier, according to a Jan. 13 report compiled by Tokyo Shoko Research Ltd. Failures associated with currency-derivatives losses amounted to 26, or 35 percent of the total.

Derivatives sold five years ago to smaller businesses include a financial tool designed to reduce risks of the yen weakening against the dollar, said Kunio Hashimoto, a senior researcher at Tokyo Shoko Research. The yen’s advance since the global financial crisis has resulted in losses for companies that bought such products, Hashimoto said.

As part of its efforts to prop up companies, the agency has unveiled plans to extend a moratorium on loan repayments for small and midsized businesses by a year.

EU Considers Basel-Rule Changes for Covered Bonds

Covered bonds and savings banks in the European Union may face less strict capital and liquidity rules than called for by global regulators, as the EU seeks to limit side-effects that may hamper the economic recovery.

The European Commission said it’s considering changes to the way the bonds, backed by pools of mortgages or state loans, and savings banks are treated as part of an “in-depth impact assessment” of rules approved by the Basel Committee on Banking Supervision.

The Group of 20 nations decided to bolster banks’ liquidity and capital to prevent a repeat of the worst financial crisis since the Great Depression. The measures, known as Basel III, were published by regulators in December, and more than double the highest-quality reserves that banks must hold. G-20 leaders pledged in November to “implement fully” the new standards.

Covered bonds typically get higher credit ratings and pay less interest because they’re backed by assets, such as mortgages, that stay on the lender’s balance sheet and that can be sold in the event of a default.

Basel III will require banks to hold a buffer of highly liquid assets, but the extent to which it can be filled with covered bonds will generally be capped at 40 percent, with the bonds subject to a cut in value. The minimum liquidity requirement is set to be introduced at the start of 2015.

The Danish government has said that Basel III will force banks to dump covered bonds. Danish economy Minister Brian Mikkelsen has raised the matter with the commission.

Compliance Action

SEC Votes to Require Disclosures on Asset-Backed Bonds

The U.S. Securities and Exchange Commission approved rules that will require issuers of asset-backed securities to disclose repurchase requests and completions related to the pooled assets.

The rules, part of the SEC’s rulemaking under the Dodd- Frank financial-regulation overhaul, were approved by commissioners at a meeting in Washington yesterday. Commissioners also approved a second set of rules requiring issuers to review assets underlying the securities as the agency moved to restore investor confidence in the ABS market.

The rule changes reflect claims, sometimes in lawsuits, by mortgage-securities investors and insurers including Allstate Corp., Pacific Investment Management Co. and MBIA Inc. that loan sellers and bond underwriters misrepresented the quality of the underlying credits and should be forced to repurchase debt. So- called mortgage putbacks may cost sellers as much as $90 billion, JPMorgan Chase & Co. analysts said in October.

Securitizers will be required to disclose their history of requests and repurchases related to outstanding ABS in tables that investors can use to review and compare the securities, the SEC said. Issuers will be required by Feb. 14, 2012, to provide tables dating back three years, the agency said.

A three-year phase-in period for the rules will give local officials plenty of time to prepare, and give the commission room to change the rules if needed, SEC Chairman Mary Schapiro said at the meeting.



SEC’s Khuzami Says New Budget Constraints Damaging Enforcement

Robert Khuzami, the U.S. Securities and Exchange Commission’s top enforcement official, said the agency’s efforts to root out fraud are being hampered by Congress’s decision to restrict funding.

Khuzami made the remarks at a securities law conference yesterday in Coronado, California.

The lack of adequate money is impairing the agency and forcing it to make “difficult choices,” such as limiting travel to interview witnesses and postponing the hiring of experts to help monitor Wall Street, he said.

Government funding for the fiscal year ending Sept. 30 has been caught up in partisan battles over taxes and spending, particularly after Republican gains in November elections. Federal lawmakers agreed Dec. 21 to fund the government at current levels through March 4, denying budget increases sought by the SEC to implement the Dodd-Frank financial-regulatory overhaul.

The division also can’t afford the technology upgrades it needs to store and manage as much as two terabytes of data it receives each month, he said.

City Index Fined $783,000 for Not Providing Accurate Reports

City Index Ltd., a spread-betting brokerage firm, was fined 490,000 pounds ($783,000) for not submitting accurate transaction reports to the U.K. finance regulator over a two- year period.

City Index failed to give the Financial Services Authority reports on about 2 million transactions, or close to 60 percent of its reportable trades, the regulator said in a statement yesterday. The FSA uses the reports to detect market abuse.

The brokerage also failed to have accurate systems in place to ensure the reports were accurate, the regulator said. The firm qualified for the FSA’s standard 30 percent discount for cooperating in the probe and commissioned a review of its reporting processes.

City Index spokesman Joshua Raymond didn’t immediately return a call for comment.

Courts

Italian Swap Cases Increase as Merrill Lynch, UBS Sue

JPMorgan Chase & Co., UBS AG and Bank of America Corp. are among banks bringing more than a half dozen Italian municipalities to London’s courts over swaps that are turning sour for both sides.

The banks are suing towns and regions across Italy, from Florence, a city of about 370,000 people, to Piedmont, the northern region with a population of 4.5 million, as some local governments threaten to stop making payments on contracts and others seek to recover fees they allege were hidden.

Italian municipalities, emboldened by Milan’s criminal trial of Deutsche Bank AG, Depfa Bank Plc, JPMorgan and UBS over allegedly fraudulent selling practices on swaps, are increasingly filing complaints at home to avoid losses on derivatives contracts. The banks are turning to U.K. courts, where they expect to get swifter and fairer judgments.

The pace of the U.K. lawsuits increased in the past month. Banks are going on the offensive to ensure their cases are heard in London, said Laurence Harris, a litigation lawyer at Edwards Angell Palmer & Dodge LLP in London. Italian courts are more likely to favor the country’s municipalities and the legal system there is slower and subject to limitation periods that could make things harder for the banks.

Italian municipalities face derivatives losses of at least 1.2 billion euros ($1.6 billion), Bank of Italy data from June 30 show.

For more, click here.

Ex-PM Group Manager Gets 27 Months for Insider Trading in U.K.

A former PM Group Plc manager was sentenced to 27 months in prison by a London judge for insider trading and money laundering.

Neil Rollins was sentenced by Judge James Wadsworth at a hearing in London today. Rollins was convicted in November of five counts of insider trading and four counts of money laundering brought by the U.K.’s Financial Services Authority.

Rollins is the seventh person to be sentenced to jail for the crime following a prosecution by the FSA. Three more people, a former Dresdner investment banker, his wife and an accomplice, are scheduled to be sentenced next month. Before 2008, the regulator had never brought an insider-dealing case.

Prosecutors alleged Rollins sold shares of Bradford, England-based PM Group, a U.K. maker of scales used in the waste-management industry where he was a senior executive, before it announced orders had fallen. The company was bought by Vishay Intertechnology Inc. in 2007.

Rollins denied all wrongdoing.

Comings and Goings

Ex-Treasury Aide Lee Sachs Forms Small-Bank Lending Venture

Lee Sachs, a former aide to U.S. Treasury Secretary Timothy F. Geithner, and banker John Delaney formed a company that aims to help smaller banks lend to a wider range of borrowers.

The management company, AlliancePartners, is assembling a cooperative network of banks and will look nationally for loans, Sachs said in an interview on Jan. 19. Lenders that join the BancAlliance network will be able to elect the partnership’s board of directors.

The Obama administration has struggled to encourage more lending from smaller banks to small businesses, in its effort to make it easier for companies to expand and hire more workers. Plans set up under the $700 billion Troubled Asset Relief Program drew few participants, and another initiative outside the rescue effort is just getting under way.

The network will service the loans and retain an interest in every loan it refers to member banks, Sachs said. The goal is to help small and mid-sized banks find and evaluate loans in new asset classes so they can manage portfolios that may be currently concentrated in commercial real estate, he said.

Johnson Quits, Balls Named U.K. Labour Treasury Spokesman

Alan Johnson resigned as the U.K. opposition Labour Party’s top Treasury spokesman, citing personal reasons, after three months in the job. Former Education Secretary Ed Balls was named to replace him.

Balls has been one of the most vocal Labour critics of government plans to slash spending by the most since World War II to narrow the record budget deficit.

Johnson said in a statement issued by the party that he was quitting for reasons “to do with my family.” Conservative Prime Minister David Cameron and Chancellor of the Exchequer George Osborne have attacked Johnson for not mastering his Treasury brief.

Labour Party leader Ed Miliband said in a statement issued in London yesterday that he accepted the resignation with “great regret.”

http://www.bloomberg.com/news/2011-01-21/risk-board-asset-backed-bonds-sec-hampered-compliance.html?cmpid=yhoo

[nlightn]

SEC Requires Disclosures on Asset-Backed Bonds in Rules Opposed by Munis
Jesse Hamilton and Jody Shenn
Jan 20, 2011

The U.S. Securities and Exchange Commission approved rules that will require issuers of asset- backed securities to disclose repurchase requests and completions related to the pooled assets.

The rules, part of the SEC’s rulemaking under the Dodd- Frank financial-regulation overhaul, were approved by commissioners at a meeting in Washington today. Commissioners also approved a second set of rules requiring issuers to review assets underlying the securities as the agency moved to restore investor confidence in the ABS market.

“ABS issuers would be required to disclose the history of the repurchase requests they received, and the repurchases they made,” SEC Chairman Mary Schapiro said at the meeting. “Disclosure would be required to be filed in tabular format to help investors use this information to identify originators that may have underwriting deficiencies.”

The rule changes reflect claims, sometimes in lawsuits, by mortgage-securities investors and insurers including Allstate Corp., Pacific Investment Management Co. and MBIA Inc. that loan sellers and bond underwriters misrepresented the quality of the underlying credits and should be forced to repurchase debt. So- called mortgage putbacks may cost sellers as much as $90 billion, JPMorgan Chase & Co. analysts said in October.

‘Rational Measures’

The disclosure rules are “rational measures aimed at providing investors with the information that they need, without unreasonable cost,” Schapiro said. They provide relief for issuers who can’t get the required information without unreasonable expense, she said.

Securitizers will be required disclose their history of requests and repurchases related to outstanding ABS in tables that investors can use to review and compare the securities, the SEC said. Issuers will be required by Feb. 14, 2012, to provide tables dating back three years, the agency said.

“They shouldn’t affect issuance much one way or another, but they may allow investors more comfort when analyzing deals in the secondary market,” said Ronald Thompson Jr., head of asset-backed securities strategy at Knight Libertas LLC in Greenwich, Connecticut.

The market for U.S. home-loan bonds without government backing, where allegations of misrepresentations are most common, has failed to revive even as other securitization markets gear up again. Only one securitization of new residential mortgages, totaling $237.8 million, has been completed in almost three years, compared with the market’s record issuance of $1.2 trillion in each of 2005 and 2006.

Municipal Authorities

Municipal authorities, such as housing agencies or state education authorities, that sell bonds and use the proceeds to make loans for projects or home purchases, opposed the rules, saying they would saddle them with unnecessary regulations.

A three-year phase-in period for the rules will give local officials plenty of time to prepare, and give the commission room to change the rules if needed, Schapiro said.

Republican Commissioners Kathleen Casey and Troy Paredes raised objections to the rules requiring reviews of ABS assets by issuers or designated third parties.

“It is not clear to me what is gained,” said Casey, who cited the “reasonable assurance” standard for assuring the accuracy of disclosures in voting against the measure.

MBIA, in a lawsuit against Bank of America Corp., said its reviews found that 91 percent of defaulted or delinquent loans packaged into a set of bonds by the bank’s Countrywide Financial Corp. unit had “material discrepancies from underwriting guidelines,” such as borrower incomes, credit scores or debt-to- income ratios.

“I believe that a minimum standard better serves investors’ interest,” Schapiro said. “Investors need to know that issuers are taking steps to check that the assets in the pool are what the prospectus represents them to be.”

http://www.bloomberg.com/news/2011-01-20/sec-approves-rules-requiring-greater-disclosure-on-asset-backed-securities.html?cmpid=yhoo

[momentum74]

Covered MBI short 9.74 taking profit

[momentum74]

Einhorn says MBIA still faces trouble
MBIA Inc.
$9.88
-0.17-1.69%12/07/2010

David Einhorn, President of Greenlight Capital, speaks at the Reuters Investment Outlook Summit in New York December 7, 2010.
Credit: Reuters/Brendan McDermid
By Dan Wilchins

NEW YORK | Tue Dec 7, 2010 11:26pm GMT

NEW YORK (Reuters) - Bond insurer MBIA Inc (MBI.N) still faces problems, and it is hard to tell whether the company has enough assets to meet its obligations, hedge fund manager David Einhorn said on Tuesday.

Einhorn, the president of Greenlight Capital, questioned the big gains that MBIA has recorded from the declining value of its liabilities, as credit markets have grown more concerned about its ability to pay its obligations.

Whether or not that's allowed by accounting rules, it doesn't make sense from an economic perspective, Einhorn told the Reuters 2011 Investment Outlook Summit.

"To say your equity has value because your liabilities can't be satisfied is a questionable proposition," he said.

Chuck Chaplin, chief financial officer at MBIA, said the company is following accounting rules regarding gains on liabilities.

"I take his comment that it's confusing and maybe counterintuitive, but it is required," Chaplin told Reuters.

Einhorn declined to comment whether Greenlight Capital has bet that MBIA'S shares will drop by selling it short. Einhorn was among the investors that shorted MBIA for years before the financial crisis began, in part because he did not think the company was being forthright about its potential losses.

"I think MBIA has a lot of problems still," Einhorn said on Tuesday.

MBIA's shares peaked in early 2007 at more than $70, but later that year began a headlong descent as the U.S. mortgage crisis created huge potential losses for the company.

The insurer had guaranteed that complicated bonds linked to mortgages would not default, but as the subprime crisis widened, that proved to be a bad bet. MBIA's biggest rival, Ambac Financial Group Inc ABKFQ.PK ,also laid low by the mortgage crisis, filed for bankruptcy last month.

MBIA has soldiered on. Its shares trade at about $10, giving the company a market value of $2 billion. By the company's own accounts, it is worth about $2.5 billion, based on the value of its assets minus its liabilities.

A DIFFERENT STANDARD?

In addition to the gains it has recorded as its liabilities have fallen, MBIA has recorded more than $2 billion of assets from expected proceeds from legal action against banks that sold bad mortgages to bond investors. MBIA guaranteed those bonds against default, and now says it should not have to make good on those guarantees because it was duped.

Generally, companies can only record gains from lawsuits when the outcome of the litigation is both "probable" and "estimable."

But MBIA has historically refrained from taking losses on insured bonds because it claims the losses are neither probable nor estimable, Einhorn said.

Einhorn says MBIA still faces trouble

Tweet ThisShare on LinkedIn Share on Facebook0diggsdiggFactboxTop investors' 2011 trade picks
Tue, Dec 7 2010Quotes
MBIA Inc.
MBI.N
$9.88
-0.17-1.69%12/07/2010
By Dan Wilchins

NEW YORK | Tue Dec 7, 2010 11:26pm GMT

"So I wonder if there is a different standard MBIA uses for probable and estimable on things that they've insured versus for recovering litigation," he said.

Einhorn said that because MBIA is not writing much new business, a key part of analyzing the company is determining whether its assets are sufficient to cover its obligations.

"It's hard to tell," he added.

MBIA's Chaplin said one of the company's main insurance units has equity by one standard of nearly $1 billion, and by the standards of insurance regulators, about $3 billion.

"It's not appropriate to say that it's hard to tell, because the number's printed on the page. But if someone says the GAAP accounting is very complex for this relatively simple business, I'd have to say, 'yes, it is,'" Chaplin said.

Said Einhorn, "I think MBIA's accounting is very hard to follow."

(Reporting by Dan Wilchins; Editing by Leslie Adler)




http://uk.reuters.com/article/idUKTRE6B66VN20101207?pageNumber=1

[birdshot]

i'm with ya... have a few puts.

[momentum74]

re MBI 9.87 Looking to hold overnight .On MBI short

[birdshot]

holding overnite or gonna cover eod? thx.

[momentum74]

Shorted some MBI 9.91 Eignhorn questions accounting for litigation recoveries.

MBI. 9.87 December 7, 2010
12:52 EDT MBI theflyonthewall.com: Einhorn questions MBIA's accounting for litigation recoveries, Reuters says
:theflyonthewall.com



November 29, 2010
09:45 EDT MBI theflyonthewall.com: Active equity option families in first 10-minutes

[hurley cruppers]

MBI weekly chart is smokin' hot, after $10.92 comes the $19.08, then $37's

[mlkrborn]

MBIA reports quarterly net income of $1.3 bln
4:28p ET August 9, 2010 (MarketWatch)
SAN FRANCISCO (MarketWatch) -- MBIA Inc. said late Monday that second quarter net income attributable to common shareholders came in at $1.3 billion, or $6.32 a share, up from a year earlier when the bond insurer reported net income of $895 million, or $4.30 a share. Adjusted pre-tax income, which excludes a $1.5 billion derivatives gain and several other items, was $14 million in the latest period, the company added. "In the second quarter, we saw both our paid losses and new delinquencies on insured RMBS exposures continue to decline," MBIA Chief Financial Officer Chuck Chaplin said in a statement. MBIA shares jumped 11% to $10.23 in after-hours trading on Monday.

[hurley cruppers]

mo, you can see that $15 coming in the weekly chart I posted. jmho