On their website, FT.com, the Financial Times reports:
"NEW YORK (Standard & Poor’s) June 5, 2008–Standard & Poor’s Rating Services today lowered its financial strength ratings on Ambac Assurance Corp. and MBIA Insurance Corp. to ‘AA’ from ‘AAA’ and placed the ratings on CreditWatch with negative implications.
Along with those two institutional cuts, $1000bn (that's $1 Trillion to we Americans) of bond issues will also lose their triple A’s.'
"NEW YORK June 6, 2008– Standard & Poor’s Ratings Services lowered its financial strength ratings on XL Capital Assurance Inc. (XLCA) and XL Financial Assurance Ltd. (XLFA) to ‘BBB-’ from ‘A-’. The ratings remain on CreditWatch with negative implications.
The downgrade reflects our current assessment of potential losses on the companies’ 2005-2007 vintage RMBS exposure, direct and indirect, which is higher than previous estimates. In our view, XLCA and XLFA’s combined capital cushion is inadequate at the previous rating level to absorb those losses'
"Standard & Poor’s Ratings Services lowered its financial strength ratings on CIFG Guaranty, CIFG Europe, and CIFG Assurance North America Inc. (collectively CIFG, or the company) to ‘A-’ from ‘A+’ and placed the ratings on CreditWatch with negative implications.'
"Standard & Poor’s Ratings Services placed its ‘BB’ financial strength rating on Financial Guaranty Insurance Company (FGIC) on CreditWatch with negative implications. The rating previously had a negative outlook. Likewise, Standard & Poor’s placed all other FGIC ratings, as well as those of parent company FGIC Corp., on CreditWatch with negative implications."
Well, where can we begin?
To start, I wonder how many pension funds and the like are holding the $ 1 Trillion plus in RMBS and derivatives that must now be sold onto the open market, where there are no buyers? More importantly, is your retirement account one of them?
Every single one of the bond issues described above started as AAA, all within the last two to three years. To add to the enormity, these downgrades represent only a fraction of issues that have been and are being currently downgraded as housing valuations decline and foreclosures rise.
And to go from AAA to BBB-?!? From investment grade to almost junk in less than a year. With the bond issues on negative watch! KABOOM! Think the "Credit Crunch" is going to ease anytime soon? I don't. In fact, it just got a whole lot 'crunchier'.
How do Fitch's, Moody's and S&P not get regulators galore in their offices and in their books is a mystery to any honest people. They gave AAA ratings to Mortgage Backed Securities which were built on mortgages given to people with poor credit histories. That means they had a track record of not paying their bills on time! How could these securities get the same rating as the safest investment in the world, a United States Treasury Bond?
Yesterday it was reported that AIG is under scrutiny by the SEC. They are asking AIG how they valued their Credit Default Swaps (CDS) in light of the $5.29 Billion loss in the 4th quarter 2007 and the $7.81 Billion writedown in the 1st quarter 2008. Hmmmm. Yes, how did you value them?
Credit Default Swaps are used to insure RMBS, CDO's and other derivatives. As the derivatives lose value, the issuers of the CDS must make good on the losses. Doesn't take long to realize that with $600 Trillion in derivatives, with a 20% to 40% to 60% blow-up, that some very large companies playing in that game are going to go bye-bye.
"NEW YORK (Standard & Poor’s) June 5, 2008–Standard & Poor’s Rating Services today lowered its financial strength ratings on Ambac Assurance Corp. and MBIA Insurance Corp. to ‘AA’ from ‘AAA’ and placed the ratings on CreditWatch with negative implications.
Along with those two institutional cuts, $1000bn (that's $1 Trillion to we Americans) of bond issues will also lose their triple A’s.'
"NEW YORK June 6, 2008– Standard & Poor’s Ratings Services lowered its financial strength ratings on XL Capital Assurance Inc. (XLCA) and XL Financial Assurance Ltd. (XLFA) to ‘BBB-’ from ‘A-’. The ratings remain on CreditWatch with negative implications.
The downgrade reflects our current assessment of potential losses on the companies’ 2005-2007 vintage RMBS exposure, direct and indirect, which is higher than previous estimates. In our view, XLCA and XLFA’s combined capital cushion is inadequate at the previous rating level to absorb those losses'
"Standard & Poor’s Ratings Services lowered its financial strength ratings on CIFG Guaranty, CIFG Europe, and CIFG Assurance North America Inc. (collectively CIFG, or the company) to ‘A-’ from ‘A+’ and placed the ratings on CreditWatch with negative implications.'
"Standard & Poor’s Ratings Services placed its ‘BB’ financial strength rating on Financial Guaranty Insurance Company (FGIC) on CreditWatch with negative implications. The rating previously had a negative outlook. Likewise, Standard & Poor’s placed all other FGIC ratings, as well as those of parent company FGIC Corp., on CreditWatch with negative implications."
Well, where can we begin?
To start, I wonder how many pension funds and the like are holding the $ 1 Trillion plus in RMBS and derivatives that must now be sold onto the open market, where there are no buyers? More importantly, is your retirement account one of them?
Every single one of the bond issues described above started as AAA, all within the last two to three years. To add to the enormity, these downgrades represent only a fraction of issues that have been and are being currently downgraded as housing valuations decline and foreclosures rise.
And to go from AAA to BBB-?!? From investment grade to almost junk in less than a year. With the bond issues on negative watch! KABOOM! Think the "Credit Crunch" is going to ease anytime soon? I don't. In fact, it just got a whole lot 'crunchier'.
How do Fitch's, Moody's and S&P not get regulators galore in their offices and in their books is a mystery to any honest people. They gave AAA ratings to Mortgage Backed Securities which were built on mortgages given to people with poor credit histories. That means they had a track record of not paying their bills on time! How could these securities get the same rating as the safest investment in the world, a United States Treasury Bond?
Yesterday it was reported that AIG is under scrutiny by the SEC. They are asking AIG how they valued their Credit Default Swaps (CDS) in light of the $5.29 Billion loss in the 4th quarter 2007 and the $7.81 Billion writedown in the 1st quarter 2008. Hmmmm. Yes, how did you value them?
Credit Default Swaps are used to insure RMBS, CDO's and other derivatives. As the derivatives lose value, the issuers of the CDS must make good on the losses. Doesn't take long to realize that with $600 Trillion in derivatives, with a 20% to 40% to 60% blow-up, that some very large companies playing in that game are going to go bye-bye.
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