Bond insurers survey the damage
Bond insurers are some of the biggest casualties of the subprime crisis, and this week we'll find out more about how much damage has been done to companies like MBIA and Ambac. Alisa Roth has more on bond profits.
A bond trader signals an offer. (Scott Olson / Getty Images)
More on Investing
TEXT OF STORY
Scott Jagow: Bond insurers are some of the biggest casualties of the subprime crisis. This week we'll find out more about how much damage has been done to companies like MBIA and Ambac. They report their profits, or lack thereof. From New York, Alisa Roth reports.
Alisa Roth: Companies like MBIA and Ambac make their money by guaranteeing bonds. If an issuer defaults, the guarantors pay the investor the principal and the interest.
Used to be, bond insurers made most of their money on municipal bonds. But over the last few years, they started guaranteeing mortgage-backed bonds, too. As mortgages have gone belly up, the insurers have found themselves in trouble.
Gary Ransom is an equity analyst at Fox-Pitt Kelton. He says there's another reason times are tough.
Gary Ransom: The municipal biz still exists, but the amount that is insured has gone down substantially.
Kelton says it's not clear when the muni bond business will pick up. Or what the bond insurance business will look like when the market gets better.
Ransom: The direction we seem to be heading is that we will probably have companies that only insure municipalities and do nothing else.
Municipalities don't default nearly as often as other issuers. So the bond insurance business would be less risky. But also less profitable.
In New York, I'm Alisa Roth for Marketplace.
Comments
Comment | Refresh
Post a Comment: Please be civil, brief and relevant.
Email addresses are never displayed, but they are required to confirm your comments. All comments are moderated. Marketplace reserves the right to edit any comments on this site and to read them on the air if they are extra-interesting. Please read the Comment Guidelines before posting.
You must be 13 or over to submit information to American Public Media. The information entered into this form will not be used to send unsolicited email and will not be sold to a third party. For more information see Terms and Conditions and Privacy Policy.