News of significantly vast potential to achieiving a successful combination of "Bank Bailout" using Taxpayer Money, coupled with Private Capital Injection, has surfaced very recently: Jody Shenn and Fabio Benedetti-Valentini, "Assured Guaranty to Buy Dexia's FSA Bond Insurer (Update 4)" (Bloomberg.com, Friday, November 14, 2008). In this seemingly arcane report of business dealings, a report seemingly without meaning except to the companies involved, a way is shown to achieve success where success has not been achieved by the current U.S. Treasury Department and Federal Reserve. It took a combination of Taxpayer Funds and a new CEO who reportedly is interested in reducing risk of the kind associated with the worldwide financial failure rather than, say, obtaining a new installment of more Taxpayer Funds.
Dexia SA is a bank. It is reportedly the largest lending institution to local governments in the world. In September, 2008, Dexia received a "lifeline" or bailout from the governments of France, Belgium and Luxembourg to avoid its own collapse following the bankruptcy filing of Lehman Brothers in that month. The bailout is reported in the linked newspaper article as amounting to $8.1 Billion. Dexia's share price reportedly fell 74% in 2008.
Dexia SA sold its Bond Insurance business in a private deal with another corporation. In the November deal, Dexia arranged for a private capital infusion -- after the September bailout -- by which Dexia will receive $361 Million in cash. Dexia will also obtain a 24.7% share of the buyer, a Bond Insurance Company, Assured Guaranty Ltd.
The Bond Insurance business sold by Dexia to Assured Guaranty is called Financial Security Assurance, Inc. Reportedly, Assurance Guaranty purchased all of FSA's "insured portfolio of $425 billion, of which $110 billion was asset-backed securities". Id. ("Asset-backed securities is a euphemism. According to the free online encyclopedia, Wikipedia, Collateralized Debt Obligations are unregulated asset-backed securities: link here.)
The private deal does not include a much smaller "$16.5 billion financial products portfolio" held by FSA. Shenn and Benedetti-Valentini, supra. This foolish investment portfolio remains with FSA. Undoubtedly, it is the main reason for the $8.1 Billion bailout by France, Belgium and Luxembourg. Two of those three nations, France and Belgium, will reportedly guarantee FSA's "assets."
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