The ripples from the subprime-mortgage-induced credit crisis continue to extend outward, garnering continued interest among visitors to Research Recap.
The top post of the week was Subprime Woes To Boost Muni Funding Costs, Slow Spending, in which CreditSights outlined how tighter credit conditions and higher risk premiums are pushing up lending costs for state and local governments and therefore will have a negative impact on funds available for public spending.
The impact of the subprime crisis on the monoline bond insurance industry also was a popular topic, with Monoline Bond Insurers Next for Bailout?, also from CreditSights, and the multi-sourced Monoline Bond Insurers Under the Spotlight both making the top five. Since those posts Fitch Ratings has placed monoline insurer MBIA on review for a downgrade. The company posted on its website details of its exposure to collateralized debt obligations backed in part by subprime loans.
Fitch also placed Ambac on Rating Watch Negative on Friday. In the Financial Times, Lex notes that the disclosure showed that MBIA held $8 billion in “CDOs of CDOs (or so called CDOs squared),” sending the company’s stock down 25%.
MBIA can say the underlying collateral is overwhelingly AAA or AA. Nobody is listening. Markets have had enough of supposedly armour-plated securities tanking. – Lex.
The dramatic downgrade by Standard & Poor’s (from A to CCC) of smaller bond insurer ACA is going to have a serious impact, according to Alphaville. “Take, as illustration, the fact that ACA’s downgrade also led to the immediate downgrade of 3024 municipal bond issues on Wednesday. ”
Backgrounders from NERA Economic Consulting on the subprime crisis continued to be popular, with its Primer on Subprime Mortgage Accounting Allegations and Subprime Mortgage Lending Primer both making the top five again.
In a new year-end update of Recent Trends in Shareholder Class Actions NERA notes that there were no subprime-related shareholder class actions in 2006, but 38 such cases were filed between February 8, 2007 and December 15, 2007.
Looks like next year could be a good one for shareholder class action lawyers.