Bond Insurance Crisis and the Government by Milota Sidorova

Secular mortgage crisis passed the borders of U.S. Wall Street few months ago. The declining economy has negative affected all resorts and sectors, including industry, bond insurance, social, school and welfare system as well as has influenced the world' s largest markets since August 2007. The negotiations and number of theories fed by the volatility and instability of critical situation led into the open discussion concerning governmental interventions. According Moody's Investors Service, American credit-rating agency, the problem is a lack of capital, or a cash necessary to smooth run of the economy. Its Thursday report also declared the drop from "AAA" to "A3" securities of Financial Guaranty Insurance Co. To maintain the business bond insurers usually expect at least "AAA" rating. Hereby Michael Callen, the chairman of Ambac Financial Group inc., underlined the key importance of stable and predictable credit ratings by the agencies that causes and influences customer and investor confidence. To stop the slowly sinking boat, there is a need for an immediate action. Last week events brought to the market some challenges. For example MBIA Inc., the bond insurance giant increased $1 billion in a stock offering. The second stimulating news was Warren Buffet's however rejected offer to back up to $800 billion in municipal bonds. Following MBIS case, the company suggests that has 'adequate capital' to overcome the crisis, that' s why the governmental support is unnecessary. Its chairman, Charles Chaplin surprisingly confident quoted, that the risk of loosing high ratings is misplaced. In an effort to safe the money, the trouble backed bonds had to be sold out in the periodic auctions. Whereas not only America wait for bond insurer's recovering the decreasing ratings still cause serious problems with the municipality industry.

related story: http://news.yahoo.com/s/ap/20080214/ap_on_bi_ge/bond_insurers_congress;_ylt=AvUfqkZMHKWRmSWb89atBDGs0NUE

by Milota Sidorova for PocketNews (http://pocketnews.tv)

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