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Sunday September 21, 2008: "Paulson's Monster" needs $700 trilllion. Moody's questioned.

shanadonohue — Sun, 21 Sep 2008 12:36:33 +0000

“Paulson’s Monster”, as it’s being called, has now proposed the need for $700 billion of taxpayer dollars, raising the US debt limit to $11 trillion, to spin off the bad sectors of the financials into its own entity. Paulson claims his plan will “minimize” the cost to the taxpayer in the long run, but who can really be sure? As part of the plan, Paulson said that he was currently in talks with other countries for help. He wouldn’t disclose which countries.

Back in Ratings land, one ABK message boarder claimed that the Feds raided Moody’s on Friday looking for connections between the ratings company and hedge funds. No link was provided, and given that any Joe Schmo can go on a Google Finance board and post whatever he or she pleases, it could very well be completely fabricated. However, a Bloomberg article titled “Berkshire’s Bond Insurer, Moody’s Stake Face Probe”, reports that one such link may in fact come to light:

“Billionaire Warren Buffett’s Berkshire Hathaway Inc. faces a probe by Connecticut’s attorney general for possible conflicts created by owning almost 20 percent of credit ratings company Moody’s Corp. while also running a new municipal bond insurer.

Moody’s gave its top rating last week to Berkshire Hathaway Assurance Corp., created in December as existing bond insurers struggled to maintain their AAA ratings. A favorable rating for Berkshire by New York-based Moody’s, or a lower rating for competitors including MBIA Inc. and Ambac Financial Group Inc., may give Buffett’s company an advantage.”

So maybe there is truth in rumor.

In other news, Barclays is the proud new owner of Lehman Brothers’s investment banking and trading businesses. The $1.75 billion deal approved yesterday is a definite bargain as compared to the one Barclays would have had to strike last week for Lehman’s entire assets before bankruptcy.

Merrill Lynch files lawsuit involving 7 CDS against XL Capital Assurance/SCA

Administrator — Thu, 20 Mar 2008 00:01:18 +0000

The question is, whether XL’s termination of 7 Merrill CDS will accelerate the big derivative

UK Parliament issues scathing report on bankers

Administrator — Tue, 04 Mar 2008 03:02:24 +0000

Digested version: bankers ignorant, reckless. The Treasury committee of the Parliament has now iss

Check VIDEO page: Flashback to Ambac CEO telling us Ambac is very safe, its portfolio in very good shape, all AAA

Administrator — Thu, 07 Feb 2008 19:57:53 +0000

Bill Ackman strikes again against monolines - read his latest letter

Administrator — Thu, 31 Jan 2008 16:52:30 +0000

Here is a copy of Bill Ackman’s latest letter on the monoline mess, dated January 30, 2008, t

Effect of downgrading monoline on the underlying municipal bond securities

Administrator — Wed, 30 Jan 2008 21:41:08 +0000

This is a big issue, and Moody’s tried to explain. A municipal security apparently will then

How to fix the bond insurer/monoline mess

Administrator — Wed, 30 Jan 2008 21:16:44 +0000

We all know the monolines (bond insurers) are a huge mess. Although they insure massive amounts of

ACA rating cut to CCC

Bob Morris — Thu, 20 Dec 2007 05:15:41 +0000

Bond insurer ACA may have to be propped up by investment banks after being downgraded to S&P. Reason: The banks have billions in holdings insured by ACA. But, it’s not at all a given that ACA can be propped up. And bond insurer heavyweights MGIA and Ambak are having similar problems.

The quite real possibility of a cascade of defaults is obvious.