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What goes up…

MBIA - which filed its quarterly results on Monday - enjoyed something of a share price bounce. Odd considering that the results, by any yardstick, were dismal. Shareholders seemed more than willing to toe the line from CEO Jay Brown:

We have ample liquidity, our balance sheet is built to withstand credit stress levels many multiples of what we’re experiencing now, and our business model is proving that we are adequately capitalized to satisfy any potential claims on our insured portfolio.
By hook or by crook, so it seemed, MBIA had a triple-A rating and - bad though the results might have been - the company wasn’t going bust.

All well and good until Tuesday, when Moody’s rather unceremoniously rained on the parade - closing out, with neat symmetry, those ill-gotten gains the day before.

Surprise at further “material credit impairment losses on ABS CDOs” was, apparently, presented by the rating agency without irony. So too, a re-questioning of that triple-A so controversially affirmed a few months ago: “existing concerns” about capitalisation relative to the “Aaa benchmark” were accordingly “elevated”.

What a difference a CEO makes.

Arguments over whether the triple-A will go or not, however, may be pretty moot. (Our guess being that it’s now there to stay) This also from MBIA’s 10-Q:

The Company had very little new business production until its Triple-A ratings were affirmed with negative outlooks by S&P and Moody’s in the last week of February.

In other words, could this merest suggestion of “elevated” doubt at Moody’s be enough to drive off what little continuing business MBIA (and, of course, Ambac) are hoping to write? If not a sudden death for the bond insurers, surely a slow one.

See also, Calculated Risk, for a little on MBIA’s latest legal straw-clutching.

Related stories
Writedowns push MBIA to $2.4bn loss - FT
Moody’s Investors president steps down - WSJ
Moody’s sticks to ratings scale - FT