``MBIA's exposure on the MBS led to it being downgraded and unable to underwrite new municipal bonds because a poorly-rated insurer is hardly an attractive credit enhancement for a muni bond. MBIA's solution was to split its insurance business into two insurance companies: a structured products insurer which retained the liability for the MBS and a municipal bond insurer with a common parent holding company. My impression is that these two units have an ultimate common parent, but are ring-fenced insurance companies; I do not think funds can be easily shifted from one unit to the other (and doing so would threaten the muni insurer's business). MBIA's regulator approved the move, but it's been challenged by BofA among others. ''

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