Speaking of splits, Split Enz had a bunch of songs that detail the current mess:
(the band wasn't that good, unless you were a 14 year-old Kiwi girl but the titles nail the monolines)
Straight Old Line
Give it a Whirl
I Got You*
Stuff and Nonsense
Out of the Bag
I See Red
Six Months in a Leaky Boat
I Walk Away
Never Ceases to Amaze Me
From the Aleph Blog:
Let the Lawsuits Begin — III
There are a variety of interested parties with an interest in keeping the guarantors in one piece, as is pointed out in this article from Bloomberg. Downgrading half a trillion of asset-backed bonds if a split happens? Yes, that is the price, and that is why there will be many lawsuits to contest any split, as pointed out by naked capitalism. The discussion of that post is worth reading, because it got me thinking about the differences between swaps and insurance. There are two ways to go here:
- A swap that mimics the nature of an insurance contract is an insurance contract. After all, that is the way their regulators have been behaving, at least up until now.
- A swap is a side agreement between the operating company (the actual insurer, not the parent holding company MBIA or Ambac), and the counterparty. In liquidation, they would be treated at general creditors, behind the policyholders in liquidation preference.
- Roger Ehrenberg at Information Arbitrage sees the issues clearly.
- FT Alphaville features my comments, and adds to them.
- Good interview by Chris Whalen of David Kotok discussing the furor in municipals at present.
- For wonks only: from Stroock & Stroock & Lavan, a discussion of how derivatives are treated in insurance insolvencies. Yes. I actually got out my old insurance law books this afternoon, but they were no help. Interesting article that would support the hardball case.