The Great MBIA Debate...

remember a few months back when Cramer was warning everyone about the danger MBIA & AMBAC presented to the financial system. In case you forgot, MBIA and AMBAC insure billions of mortgages for regional and investment banks, so if they go under these numerous banks will have to endure further charge offs. Well it now appears that the two of them are rallying hard and now many "experts" (aka guys who were buying them at $25-30 dollars) are calling a bottom.

Now I honestly don't know whether MBIA and AMBAC can survive this mess, but what I do know is that these two promised everyone that they would make good on their payments and now with defaults rising those insurance promises are looking bleaker and bleaker. I recently read a NYT article which summed up this debate over the bond insurers:

In the debate over the fate of MBIA, a key question is whether or not the pace of mortgage defaults is likely to increase, level off or ease up. Mr. Brown, for his part, believes that the crisis is working itself out: “The pig (that is, poorly underwritten and fraudulently secured loans) is steadily moving through the python,” he wrote on his blog.

Mr. Brown might believe the defaults have peaked but I respectfully disagree given my stance on ALT-A POA's not to mention the small cracks forming in Prime mortgages. Therefore I believe that more pain is in store for these two insurers and the banks they do business with.