Bill Ackman Was Right: MBIA, Ambac on `Ratings Cliff' (Update1): “Bill Ackman was right: the world's largest bond insurers aren't worthy of a AAA credit rating and may be headed for the bottom of the scale.
Ackman, the 42-year-old hedge fund manager who says he stands to make hundreds of millions of dollars betting against MBIA Inc. and Ambac Financial Group Inc. if they go bankrupt, will tell investors at a conference in New York today that losses posted by bond insurers may threaten to breach the capital limits allowed by regulators, making them insolvent.
That once-unthinkable scenario would trigger clauses in $400 billion of derivative contracts written to insure collateralized debt obligations and other securities, allowing policyholders to demand immediate payment for market losses....
I am going to say it right here and right now. Both Fannie Mae (FNM) and Freddie Mac (FRE) will go the way of MBIA (MBA) and Ambac (ABK)… They are next. It is inevitable.
They are similar enough. Tiny equity and cash bases that can’t possibly sustain a ridiculously large and overleveraged portfolio of extremely poor quality…,
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