Thursday, May 14, 2009

Bond Insurers Back Away from Obligations

Syncora Guarantee stopped payment on bonds and asset backed securities it insured. MBIA, the huge bond insurer, effectively followed Syncora's lead by transferring $5 billion in assets to a new municipal bond insurance business. Large banks are suing. Reuters reported:

A group of major banks including Citigroup Inc, JPMorgan Chase & Co and Barclays Plc has sued MBIA Inc, charging that the bond insurer illegally restructured its operations by moving $5 billion of assets and leaving a key unit effectively insolvent.

Financial firms selling something they won't back? What a surprise! Syncora imploded. MBIA Insurance may be next. Is the same thing happening at Ambac?