Ambac's shares are up 70% today
Ok, it is good news for Ambac that the monoline insurer of bonds posted a profit late yesterday of $558 million versus a $2.3 billion loss in the year ago quarter. But the fact remains that when you peel away some of the items behind the earnings, the company still didn’t perform all that well.
For starters, it had a $133.2 million gain related to the change in value of its credit derivatives portfolio. Add to that a $472 million tax benefit. Those numbers alone add up to $605 million of gains.
It continues to see stress in its portfolio of residential mortgage backed securities. The company recorded a net loss of $385.4 million.
The worst may be over for companies like Ambac. But that doesn’t mean they are finished feeling the pain of the credit crisis.
Tags: AMBAC, Bond Insurance, Credit Crisis, Credit Derivatives, Housing, Mortgages, Residential Mortgage Backed Securities, Rick Stine, Tax Benefits
The New York Fed on Maiden Lane
The Securities and Exchange Commission today approved a rule today designed to reduce the risk in markets like those for asset-backed securities. But some real questions remain as to whether the new rule would really prevent much of anything.
Basically, the SEC wants issuers of asset-backed securities to retain at least 5% of the securities they are offering. As SEC Chairman Mary Schapiro says: It will force them to have some “skin in the game.”
But will making issuers have “skin in the game” really make them more responsible in evaluating risk?
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Tags: AMBAC, Asset-Backed Securities, Bank Bailouts, Bear Stearns, Credit Crisis, credit default swaps, Maiden Lane, Mary Schapiro, MBIA, Monoline Insurers, New York Federal Reserve Bank, Rick Stine, Securities and Exchange Commission, Subprime Mortgages, Toxic Assets
