Friday, 21 December 2007
The subprime crisis just keeps on rolling.
This US subprime thing just gets worse. Just when you think the US housing market has bottomed out, something else comes along to send it crashing down further.
Today, MBIA Inc, the world's largest bond insurer, announced that it had guaranteed $8.1 billion of crappy mortgage securities. This punt has imperiled its entire net worth. Understandably, equity markets were a little concerned by this news. MBIA's shares have plunged 26 percent.
MBIA inc has guaranteed a total of $30.6 billion of complex - ie incomprehensible - mortgage securities. Since there is now a possibility that MBIA might go bust, the insurance cover it offered to investment banks looks increasingly dubious. This may require banks to write down further all that subprime toxic crap on their books.
This mess just got a lot nastier.