Moody's investors Service has recently done an incredible thing in many ways. In downgrading the Credit Ratings of two (2) Bond Insurance Companies that compete with a Bond Insurance Company owned by Moody's parent, Berkshire Hathaway, Moody's analysts reportedly wrote something astonishing.
They reportedly wrote that the business model behind Bond Insurance no longer exists. This is what they said: "'The downgrades primarily reflect Moody's view that the business model of financial guaranty insurance has been damaged over the past year due to sustained turmoil in credit markets and the very poor performance exhibited by a number of guarantors.'" Quoted in Jody Shenn, "Assured, FSA Stripped of Aaa Ratings by Moody's (Update 1)" (Bloomberg.com, Friday, November 21, 2008).
Further, the Moody's analysts expressed their view that from now on it will be "'quite challenging'" for a guarantor of only municipal debt to get or keep a Aaa Credit Rating from Moody's. Id.
This is perhaps also a belated recognition of reality: The Bond Insurance market was made only three (3) decades or so ago by financial manipulators and not in response to a real need for Insurance, or guarantees, of municipal bonds ("munis").
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