I'd wanted to use the headline "Counterparty Party," but the Calculated Risk blog seems to already be on that wavelength ... At any rate, banks and insurance regulators pow-wowed today in New York. The subject? What to do about the troubles now facing many large monoline bond insurers, whose woes run the risk of making the term "net of hedges" something of a joke at many of the nation's largest financial institutions. Via Bloomberg:
Talks in New York with the unnamed banks are part of Insurance Superintendent Eric Dinallo's effort to stabilize the bond guarantors and bolster the market's financial condition, said agency spokesman Andrew Mais in an interview ... "Clearly the market likes it," said Gregory Peters, credit strategist at Morgan Stanley in New York. "But it's not an easy situation to fix. The intent is good but we need the details; the details matter." The new capital may be as much as $15 billion, the Financial Times reported.
Looks like whatever sources Yves Smith at Naked Capitalism was speaking to a few weeks back might have been right on the money. Then, the number thrown around was $7 billion each for Ambac and MBIA. MBIA and Ambac gained strongly on the news. MBIA rose nearly 33 percent to close at $16.61 on the New York Stock Exchange; some of that gain was given up in after-market trading, with the stock dropping to $16.42. Ambac rose nearly 72 percent to close at $13.70; after-market trading saw shares slip slightly to $13.65. Disclosure: The author held no positions in MBI or ABK when this post was originally published.