NY Regulator: Ratings Fix Won’t Solve Bond Insurance Problems

Mar.12, 2008 in Market Outlook

Y Regulator: Ratings Fix Won’t Solve Bond Insurance Problems

Last Update: 3/12/2008 10:54:59 AM

By Michael R. Crittenden

Of DOW JONES NEWSWIRES

WASHINGTON (Dow Jones)–Providing more certainty on the ratings of bond insurance
firms is unlikely to completely solve all the problems the industry faces, New
York’s insurance regulator said Wednesday.

“It is important to understand that even restoring some confidence in the bond
insurers’ credit ratings is not likely to resolve all of the current problems,”
N.Y. Insurance Superintendent Eric Dinallo said in prepared remarks before the
House Financial Services Committee.

Dinallo, whose agency has been at the fore of efforts to salvage the troubled
industry following questions about financial guarantors’ credit ratings, noted
that investors have chosen to flee the auction rate securities market regardless
of the bond insurer involved.

“So improving the standing of the bond insurers is not likely to change the
current situation in this market,” Dinallo said.

He added that preserving the ratings of bond insurers like MBIA Inc. (MBI) and
Ambac Financial Group Inc. (ABK) has helped avoid worse problems in the market,
but that it cannot address the broader issues surrounding the housing crisis.

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