Dexia, SA is rushing in where angels fear to tread: the inferno of Bond Insurance. Fabio Benedetti-Valentini & Christine Richard, "Dexia Picks Up Bond Insurance Market Share; Buffett Enters Fray" (Bloomberg.com, Friday, March 21, 2008).
Dexia is billed as the largest lender to Local Governments on the face of Earth. Dexia boosted the credit rating of Bond Insurance Company Financial Security Assurance Holdings Ltd. ("FSA") by giving it a major transfusion of capital. (Dexia owns FSA.) FSA's goal in 2008 is to sell 50% or more of all new Bond Insurance Policies written in the United States. It is reported also that of the $430 Billion in Municipal Bonds that were sold in 2007, nearly $215,000,000,000.00 or nearly one-half was insured.
This rosy picture is not without thorns, however. FSA wrote down or "adjusted" $418,000,000.00 in 2007 mostly from "insured credit-default swaps on pooled corporate risk," it said in a statement quoted in the linked Bloomberg article.
Further, there are those who question loudly why Municipal Bonds need Bond Insurance at all. Anyone got a good reason?
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