Current Events

Just a tease, but be sure to read the 2002 Ackman report in its entirety.

http://www.briem.com/files/Ackman_MBIA_12092002.pdf

In the 1990s, MBIA expanded its risk tolerance and guarantee portfolio to include domestic and global structured finance guarantees on asset classes including sub-prime home equity mortgages, manufactured housing finance, aircraft leases and equipment trusts, bonds backed by hotel taxes, passenger facility charges, commercial mortgagebacked securities (CMBS), sub-prime credit card receivables, sub-prime loans on new and used autos, rental car fleets, health care equipment financing, student loans, investorowned utilities, credit-default swaps, collateralized debt obligations backed by high-yield and investment grade bonds (CDOs), synthetic CDOs (portfolios of credit-default swaps that are then securitized and guaranteed by MBIA), construction loans, emerging market CDOs, leveraged buyouts, and general corporate and other project finance.

www.reinsurancefocus.com/uploads/MBIAInc..pdf

Plaintiffs assert that investors “were not put on notice of any fraud described in the Gotham Partners report because in an immediate response,” MBIA issued a statement “vehemently denying all of the allegations.” Compl. ¶ 56. MBIA’s December 9, 2002 press release attacked Gotham Partners’ objectivity as a short-seller of MBIA securities, and quoted Jay Brown, MBIA’s Chairman, as saying: “‘Many of the points raised in the Gotham report are patently wrong, and demonstrate a clear lack of understanding. We stand firmly by the soundness of our book of business and the quality of our underwriting.” Compl. ¶ 56.

But MBIA’s release did not even specify the 1998 transactions, let alone address the particular concerns raised by Gotham, or identify any steps to relieve those concerns. MBIA’s blanket response was no more than the “mere expressions of hope, devoid of any specific steps taken to avoid under-reserving in the future” that led the Court of Appeals to reject the claimed reassurances in LC Capital Partners. 318 F.3d at 156; cf. De La Fuente, 206 F.R.D. at 384-85 (statements that focused on issuer’s overall future and did not comment on the propriety of its challenged accounting methodologies did not negate storm warnings).