Tuesday, June 3, 2008

Regulators start to offer rating services

Regulators prove again that they are behind the curve by doing the unthinkable. Holy cow! We are witnessing a revolution in the bond insurance market: Regulators will start selling a service to rate muni bonds held by bond insurers caught in a downdraft of the credit crunch. The bonds in question did not have a rating only had the wrap from the insurers (those bonds were insured by bond insurers). Regulators are handing out the ratings because they believe that the underlying creditworthiness of the municipalities that issued the bonds would be substantially higher than a junk rating. (which would be otherwise issued if bond insurers were downgraded to junk). This offers one more piece into the picture of regulators socializing losses and privatizing profits.
One question remains: Who is now regulating the regulators??

Dinallo on the issue:
There is about a half a billion dollars of bonds that life insurance companies hold that are wrapped by the muni bond insurers.

We are using a more pragmatic based approach using the securities valuation office.

Credit worthiness of these bonds has not changed at all....regulators to come in look at the books of the insurance companies and say this is not actually a junk and we are going to give you the proper capital call around it so that you don't have to take a big haircut.

On the naked naked CDS issue (see prior post): (we are going) to work through!
click for video

video: Insurance Regulators Step Up
Insight on regulators service for muni bonds caught in the credit crunch, with Eric Dinallo, New York State Insurance Department superintendent and CNBC's Melissa Francis

read also: Eric Dinallo wants to regulate the CDS market
Tuesday, May 13, 2008

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