Fitch cuts FGIC (Bond Insurer) rating to AA from AAA

[Roland99]

Source: MarketWatch

Fitch Ratings said on Wednesday that it cut the AAA ratings of Financial Guaranty Insurance Company (FGIC) to AA because the bond insurer doesn't have enough capital to keep its top rating. Fitch warned it may cut FGIC's ratings further in future. "The existing capital deficiency, which Fitch now believes totals approximately $1.3 billion, resulted from rapid credit deterioration in FGIC's insured portfolio," the rating agency said in a statement. Fitch is most concerned about transactions backed by structured finance collateralized debt obligations backed by subprime residential mortgage-backed securities (RMBS) and direct exposure to securities backed by prime second-lien home loans.

Read more: http://www.marketwatch.com/news/story/fitch-cuts-fgic-rating-aa/story.aspx?guid=%7B8BA47A22%2D30A8%2D4CB1%2D9FC6%2D17CA52CC95BC%7D&dist=hplatest

[Robbien]

1. Spoil sport

What do they think they are doing crapping on the Wall Street parade.

Funny the article actually comes out and says "transactions backed by structured finance collateralized debt obligations backed by subprime residential mortgage-backed securities." Junk backed by junk backed by junk.

[Hugin]

2. Where's Fred Sanford when you need him?

He's an expert on junk. ;)

[GETPLANING]

3. After Hours Market is Being Crushed

The Dow spent most of today in the red ahead of the FOMC policy announcement at 2:15. Once the rate cut was announced, they gained as much as 200, 38, and 24 points, respectively. The music stopped when CNBC ran the report that Fitch cut its rating on FGIC Corporation and its financial guaranty insurance subsidiaries. The sellof is continuing after hours. The market will open down about 200 points tomorrow.

[Robbien]

4. I expect a lot of the after market activity has to do with S&P downgrading

over two hundred billion of CDO instruments. S&P waited until after the closing bell to come out with the announcement.

[Roland99]

5. Whoa. i missed that one.

[Robbien]

6. It was a flashing headline on CNBC right after closing bell

and very little on the net

NEW YORK (AP) -- Standard & Poor's Ratings Services is considering slashing its rating on more than $500 billion of investments tied to bad mortgage loans, the ratings agency said Wednesday.

The massive downgrade would threaten a broad swath of the world's finance industry, S&P said, ranging from Wall Street's trading desks to regional banks to local credit unions.

Ratings from agencies like S&P play a vital role in how much investments are worth. Many funds can only buy investments carrying strong ratings, and some people blame the agencies for granting top-notch credit scores to risky investments during the housing boom.

http://www.chron.com/disp/story.mpl/ap/fn/5500070.html

Standard & Poor's said credit losses for financial institutions could eventually swell to more than $265 billion.
S&P 500 futures were down 16 points, and were below fair value, a mathematical formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract.
Nasdaq futures also dropped sharply, sliding 26.5 points, while Dow futures tumbled 112 points.

http://www.guardian.co.uk/feedarticle?id=7269426

I expect there will be plenty more said about it tomorrow.

[Pale Blue Dot]

7. Tomorrow seems like it could be a very, very bad day.

And now that the fed has shot it's load and Congress and the President have announced the stimulus package, what's going to stop the downward momentum?

[Robbien]

9. Of course Wall Streeters on CNBC said the Feds should

help bailout the bond insurers. Corporate welfare is always their first idea.

One CNBC trader actually said everyone should get out of the way and let these insurers go down and let the market take care of the fallout itself.

If nothing else, at least that trader stopped all the government welfare bailout for corporates chatter.

[Roland99]

8. Bernanke and Paulson will probably be having a late night tonight!

[sendero]

10. Yeah...

... maybe another "between meetings" rate cut :)

Maybe the Fed could go on down to 0%, yeah, that's the ticket!

[Robbien]

11. Don't you think they already knew this?

I cannot imagine Standard and Poors not keeping the Feds in the loop. Perhaps this is along with the monoline announcement were the major reasons they went 50 instead of 25 basis points?

And even the timing of the Fed announcement and then the monoline announcement and the the after hours S&P announcement was a planned event?

[Roland99]

12. Oh, I guess they did. Still, they'll have to gauge after-hours trading and plan something

most likely nefarious and greedy.

[Robbien]

13. Now I am almost positive this is being orchestrated

Monoline MBIA is announcing they are being bailed out

after close:

MBIA on Wednesday said private-equity firm Warburg Pincus completed a $500 million investment in the bond insurer, paying $31 a share for stock that has fallen to $13.96 a share since the deal was announced last month.

The company on Wednesday also said Warburg managing directors David Coulter and Kewsong Lee were named to the MBIA board. MBIA said a director Richard Walker, general counsel of Deutsche Bank AG, resigned to avoid any appearance of potential conflicts of interest in light of ongoing bail-out talks among bond insurers, investment banks and New York state's insurance department.

http://www.reuters.com/article/bondsNews/idUSWEN367620080131

And there has been a bit of talk of Buffet bailing out another major monoline.

So knowing all this
Feds surprisingly give Wall Streeters the rate cut it wants. Wall Street parties.
Minor Monoline downgraded, Wall Streeters give back all gains from rate cut.
S&P announces after closing that it plans on downgrading CDOs, Wall Street tanks in after hours trading.
Two major monolines put out the word of a bailout scheme a bit later. Good news for Wall Streeters again.

Market opens tomorrow where they believe their troubles are beginning to look like they are being covered, business as usual.

Edit: and they are doing this all fast and furious and mostly after hours to limit the damages from the hedge fund traders. Hedge fund trades magnify all major up and downs and the Feds want their actions mostly pure to have a calming effect on the markets.

[Roland99]

14. Futures have tempered as of now...

DJIA INDEX 12,332.00 -62.00 20:58
S&P 500 1,342.80 -7.80 21:02
NASDAQ 100 1,793.50 -18.00 20:57