We have previously noted the precipitous decline in the value of MBIA and Ambac, the companies which insure certain types of securities. Once again, the market had already given its opinion of the value of the companies by pushing their stocks into the basement before the ratings companies officially downgraded their credit. The other interesting thing to watch is the overall market impact which these downgrades have on the general market. One would assume that the buyers of the insured products must adjust the value of their portfolio every time the quality of the insurance backing that product falls. However, I have not read where this is being done, at least broadly.

Quote:

MBIA and Ambac have lost their triple-A credit ratings this year as guarantees they sold on mortgage-backed securities and more complex mortgage-related securities called collateralized debt obligations, or CDOs, soured. Without top ratings, bond insurers struggle to sell new policies.

Here is a link to the latest article on these insurers and their proposals to try and adjust their business models to adapt to the current conditions.
http://www.marketwatch.com/news/story/mbia-ambac-fall-concern-about/story.aspx?guid=%7B1EB8C327-B201-4585-B24D-F50A95F45EF8%7D

Michael

The Federal reserve has made it even easier for banks to borrow money from the Fed. Specifically, the previous loans had to be paid back in 28 days and now that is being extended to 84 days under the current auction. There have been so many opportunities to say these words that we need not say them again, but … “never since the Great Depression” have we seen this type of intervention by the federal government.

Quote:

“The first 84-day auction will take place on Aug. 11. The two central banks will conduct the auctions on a biweekly basis.

The Fed will alternate between auctions of $75 billion of 28-day credit and auctions of $25 billion of 84-day credit. The ECB will conduct $20 billion of 28-day maturities and $10 billion of 84-day maturity. The Swiss National Bank will also offer 84-day loans.

Experts said the move reinforced the sense that central banks remain quite concerned about the fragility of financial markets.

One analyst said the 84-day maturity is targeted at bringing the three-month LIBOR inter-bank lending rate down.

Banks have been reluctant to lend to each other and also have less cash on hand to lend.”

Here is an article on the Fed’s latest actions:
http://www.marketwatch.com/news/story/fed-tweaks-emergency-lending-operations/story.aspx?guid=%7B71C2F44A%2D23EF%2D49AF%2D8D7E%2D26DF366B51F7%7D

Michael

During a speech in Powder Springs, Georgia, on Tuesday, Barack Obama promised changes to the nation’s bankruptcy laws in an effort to help military families, senior citizens, and victims of natural disasters.

Obama accused Senator McCain of backing the interests of the banking industry and credit card companies “at the expense of hardworking Americans.” Those comments were made in reference to McCain’s support of the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act, which tightened the country’s bankruptcy laws and made filing more difficult and expensive for many debtors. Obama had voted against the measure.

Obama’s new proposals include speeding up the bankruptcy process for military families and exempting them from a “harsh means test, unnecessary paperwork, and token counseling.” Military families would also qualify to use the federal exemption scheme, regardless of their home state.

Other proposals concern victims of natural disasters, such as Hurricane Katrina, and would waive “unnecessary paperwork” and “unneeded credit counseling requirements.” He also promised a 120-day moratorium on “adverse credit actions from collectors, such as foreclosure” to help such victims recover.

These new proposals supplement previous bankruptcy changes promised by Obama, such as giving more help to people who find themselves in financial distress because of medical bills, and allowing homeowners in bankruptcy to renegotiate the terms of their mortgages.

Obama also proposed that if debtors are over the age of 62, they would have a better chance of keeping their homes in bankruptcy. His comments come at a time when the AARP has announced that the economy is hitting senior citizens particularly hard. Of the more than one million Americans who filed for bankruptcy in 2007, nearly 25% were over age 55, and filings among those ages 75 to 84 increased by 433% from 1991 to 2007.

http://ap.google.com/article/ALeqM5hiBZp5QJXYZRlj_zYa0ebd-0RsfwD91POFAG0
http://www.msnbc.msn.com/id/25804814/print/1/displaymode/1098/

Kathleen Munden