Thursday, September 25, 2008

Bailout will encourage stupid acts by big firms, says Wilbur Ross (AGO)

It appears the Congressional negotiators have a bailout deal.
Wilbur Ross, having specialized in the distressed/bankrupt arena, seems like someone worth listening to on the current financial gumbo. We kicked this link-o-rama off with his Monday appearance on CNBC which we titled "A Guy Who Might be Smarter then Warren Buffett Talks About the Financial Mess (AGO; BRK.A)". You'll find more of our posts on Mr. Ross below. On to the links. The headline story is from Reuters via Financial Week:
Large companies rescued, smaller ones left to wither, claims turnaround guru; 'terrible pattern'

Bankruptcy expert and investor Wilbur Ross said on Monday that none of the recent actions to stabilize the financial system addressed the root of the problem—helping Americans make their mortgage payments.

He also said he was concerned by decisions that saw selective institutions bailed out.

“I am disturbed about the slippery slope that we have gotten into, where if you’re stupid but really big the government will bail you out; if you’re stupid but medium-sized, you die.” >>>MORE
Also from Reuters:
Ross says Fed actions don't address root

Bankruptcy expert and investor Wilbur Ross said on Monday that none of the recent actions to stabilize the financial system addressed the root of the problem -- helping Americans make their mortgage payments.

Ross told the Reuters Restructuring Summit that a recession could last at least through next year, and said that a large part of what happens to the economy depends on what the new U.S. administration does....MORE


Wilbur Ross: Mark-to-market was a mistake

Rules requiring financial companies to value assets at current market prices were a mistake and their implementation was botched, billionaire investor Wilbur Ross said on Monday.

"I think it was a huge mistake -- both the general concept of it and more specifically the way that it was implemented," Ross said at the Reuters Restructuring Summit in New York on Monday.

He said the main problems with the rules, were that accounting treatments for the exact same security can be different for different companies, based on whether they decide to hold them to maturity, or mark-them-to market as part of a trading portfolio.

Similar inconsistencies also affect mark-to-market rules about the valuation of complex securities, like credit default swaps, Ross said.

"If I write credit protection as a credit default swap I have to mark it to market," Ross said. "But if I write it as a monoline insurer there is no mark-to-market, even though I'm taking precisely the same risk.">>>MORE

Among Mr. Ross' investments is insurer, Assured Guaranty. He was rumored to be a savior of monoline Ambac last January. He knows this stuff. In August, AGO as a followup to a July story we posted:

Don't Bet Against Wilbur Ross- Assured Guaranty (AGO)

On July 22 AGO got hammered, opening at $8.67, down from the prior day's $18.02 close. We posted "Wilbur Ross takes a beating on Assured Guaranty (AGO)" which quoted Notable Calls as saying : "..Notablecalls: I suspect AGO may be a buy here around $10 as...", it closed at $11.32. The stock drifted back down to $10.37 on the 28th and closed yesterday at $14.41....

The stock closed yesterday at $17.42.

So what else is he up to? He raised $4 Billion, for starters (again from Reuters):

Wilbur Ross sees Recovery Fund IV invested by January

Turnaround specialist Wilbur Ross said on Monday he expects his latest distressed assets fund, the WLR Recovery Fund IV, to be fully invested by January or "early next year," from 30 percent currently.

"If I had to make a rough guess, I would think that sometime early next year we'd be drawn down," said Ross, chairman and chief executive officer of WL Ross & Co, speaking at the Reuters Restructuring Summit in New York. In a follow-up comment, he said that he expected the $4.2 billion fund to be 100 percent invested by January.

Ross, one of the world's best-known turnaround specialists, has helped restructure more than $200 billion of defaulted companies' assets globally, including International Steel Group and International Textile Group....MORE
And bought some more AGO. From MarketWatch:
Assured Guaranty Ltd. Announces Agreement with WL Ross & Co. LLC to Purchase Up To Five Million Additional Common Shares of Assured

Here are some of our earlier posts on Mr.Ross:
Wilbur Ross: "1000 Banks to Fail". Nine down, 991 to go. What an Opportunity

Wilbur Ross: Run-Up in Oil Prices Is a Bubble

Seeing Oil Bubble, a Contrarian Bets on an Indian Airline

Follow-up: The bond insurers, a $200bn problem and Wilbur Ross (ABK; MBI; BRK.A)

FT Alphaville has a different take on the hot new boy-band:
Wilbur & The Monolines....
We apologize for the "Wilbur and The Monolines" bit.

Billionaire to rescue of crisis-hit US insurer (ABK)

If you are running a mismanaged monoline insurer you DO NOT want this man pulling into the parking lot. His presence means the jig's up and you're buffing that résumé. He is a VERY serious dude.

Wilbur Ross
Bond play: Ross is 'keen to take advantage of a coming wave of consolidation'