I'm working through a deep dive of AMBAC's insured positions, which they have helpfully provided in great detail. Before I get to that, I'd like to go over how bond insurance works in the ABS world as well as what the prospects are for recovery post-default from the insurer's perspective.
First of all, insurance written against ABS, MBS and CDOs (which I'm just going to refer to as ABS unless otherwise specified) comes in the form of a pay-as-you-go CDS. Put simply, this means that the insurer pays out to bond holders as interest or principal shortfalls occur. A "principal shortfall" would include any write-down, not just when the principal is legally due. This differs from a classic CDS contract, where the seller of protection (in essence, the insurer) buys the defaulted security at par. This means that the insurer will payout claims over time, not all at once. In addition, like any CDS, the insurance premium is collected over time as well. This is in contrast to municipal insurance policies, where the premium is generally collected up front.
It should also be noted that the insurers account for these policies as derivatives under GAAP guidelines. Pertinent here is that means they are marked to market. You can judge for yourself whether they are likely to be marked properly or not, but fair to say that the insurers are likely to mark down the CDS contract in advance of paying out any actual cash.
Most of the bond insurers' exposure to ABS is at the top of the structure. Here I will present a simple model for how bonds they might have insured would perform under stressed default scenarios. While this will not be at all comprehensive, it should frame the discussion of insurer losses going forward.
OK, so let's start with a simple model of $100 million RMBS off subprime collateral. We'll use the same subordination levels as in my previous post on the dangers of structure squared...
- Senior: 5.75% coupon, $80 million
- Mezz: 6.50% coupon, $15 million
- Subordinate: 8.00% coupon, $5 million
Let's say there was originally a net 6.75% coupon on the collateral portfolio. Now, let's assume that 20% of the collateral portfolio defaults immediately with no recovery, but the rest pays normally. Let's assume that the senior bond was insured, and look at what the insurer's loss position would look like.
Remember that just because 20% has defaulted, technically the obligation to pay the Mezz and Sub pieces doesn't go away. They might never get any cash flow, but the obligation would remain.
So the deal would collect 6.75% * $80 million ($20 million defaulted) or $5.4 million per year (ignoring paydowns for the moment). The Senior tranche is owed 5.75%*$80 million or $4.6 million. So even though the Mezz and Sub bonds are seeing very little of the interest they were originally owed, and are unlikely to ever see any principal, the Senior is doing fine. The insurer would not wind up paying out any cash on this deal.
Of course, the CDS on the Senior would have risen in value (bad for the insurer, who is short the CDS) substantially. The Senior bond has gone from having 20% subordination to zero, obviously the risk profile has increased markedly.
Now let's consider a deal with less subordination at origination. This would probably be because the collateral was considered stronger at the outset. Maybe it was a deal made up of "prime" loans, some of which were stated income. How the market ever looked at stated income as "prime" I'll always wonder. Anyway, let's say the structure looked like this:
- Senior: 5.75% coupon, $90 million
- Mezz: 6.50% coupon, $7 million
- Subordinate: 8.00% coupon, $3 million
Since this deal had "stronger" collateral, the coupon would be lower, say 6.25%. Again, let's say that 20% defaults immediately with no recovery.
So the deal collects $5 million in interest per year (6.25% * $80 million). The Senior is owed $5.175 million. If this Senior was wrapped the insurer would have to pay the $175,000 each year. If we assume the $20 million defaulted was written down to zero, the insurer would likely have to pay $10 million to the Senior holders (the other $10 million is Mezz and Sub's problem). In that case then the Senior would only be owed 5.75%*$80 million, or $4.6 million, in interest each year, because the $10 million of Senior notes written down is in effect a paydown of principal. That means that the insurer would have no on going interest expense but would continue to collect premiums on the CDS contract.
What happens if the loss occurs over time, which is obviously more realistic? This will especially be true with RMBS deals with longer-reset ARMs as collateral. Most deals with a 5 or 7 year fixed period won't reset for several years yet, and it may be that defaults will remain manageable until we get closer to reset. Normally, every dollar of principal repaid goes to pay off the Senior note holders until those notes are retired, which is called sequential pay. Some deals pay pro rata, but even those usually switch to paying sequentially once the deal suffers a certain number of defaults. Given the environment, the odds are good most deals will hit this trigger.
Anyway, the insurer's position is improved by prepayments. Not only is the par amount insured decline, but the percent subordination also improves. Consider a deal with $80 million in the Senior note and $20 million in other notes, for 20% subordination. If $5 million in principal is repaid, that leaves $75 million in Senior notes and still $20 million in other, or 21% subordination. The older the deal, the more this element is benefiting Senior holders.
Finally, let's consider CDOs. I think a CLO (which has bank loans as collateral) would perform similarly to what's presented above from an insurance perspective. CLO deals own the bank loans directly, just like a RMBS deal owns the mortgage loans directly. Same goes for TRUP deals and some commercial real estate deals. However, an ABS CDO is structure built on top of structure, which creates new problems, as discussed here.
So here is a sample ABS CDO structure. Again, we'll assume the Senior is wrapped and look at the loss situation.
- Senior: 5.45% coupon, $80 million
- Mezz: 6.00% coupon, $12 million
- Sub: 8.00% coupon, $4 million
- Equity: $4 million
If we assume the deal had 50/50 Mezz and Sub pieces, then the coupon would probably be about 7.25%. This time, we assume that 20% of the actual loans default. Assuming the underlying ABS were structured like the first RMBS deal discussed above (the 80/15/5) then 20% loan defaults would cause an interest short fall looking like this:
UNDERLYING DEAL CASH FLOW:
- DEALWIDE INTEREST: 6.75% * $80 million = $5.4 million
- Senior: 5.75% * $80 million = $4.6 million (satisfied in full, leaves $800,000)
- Mezz: 6.50% * $15 million = $975,000 (suffers $175,000 shortfall, or 18% of what's owed)
- Sub: Nada
CDO CASH FLOW
- DEALWIDE INTEREST: $50 million in Mezz pieces gets $2.667 million in interest (~82% *$50 million * 6.50%) and el zilcho on the $50 million in Subs.
- Senior: 5.45% * $80 million = $4.36 million (paid only $2.667 or about 61% of what's owed)
- Mezz and Sub = Confederate money.
The insurer has to make up the ~$1.7 million in interest short fall. More likely is that the insurer winds up paying out some amount of principal to the Senior note holders up front, as described above. Unfortunately, it isn't as clear when (or how much in) write downs need to occur in CDOs, because complications like overcollateralization and triggers make the principal repayment position of the Senior note holders more complicated. In fact, technically a pay-as-you-go CDS can result in the insurer paying principal to note holders, but later note holders paying some back due to better-than-expected recovery.
Anyway, what have we learned here? Well, starting with a very bearish scenario (20% immediate defaults with zero recovery), the performance of Senior notes in most ABS sectors is pretty good. The insurers would likely suffer significant write downs, because the CDS contracts will rise in value, forcing the insurer to mark-to-market their short CDS position. But their actual cash flow won't be too bad. The sectors that should perform OK are:
- Senior notes with RMBS, HELOC, and other ABS collateral.
- Direct pools of RMBS where the insurer has some subordination and/or overcollateralization as protection.
- Older ABS deals, where the insured position has already enjoyed some paydowns.
- CLO and other CDOs where the collateral is direct credit exposure, and not a repackaging of structure.
The exception is in ABS CDOs, where the structure squared problem really could hit hard. I showed a stylized example of what a 20% default rate in underlying collateral would look like, but that doesn't tell the whole story. Defaults could be higher, but occur over time. Defaults could be lower, but concentrated in higher coupon debt and therefore still cause large interest shortfalls. Defaults could be lower causing cash to flow to the junior tranches, only to later see defaults ramp up. Or defaults could be better in some deals and worse in others.
You can also see that if the ABS CDO had been made up of more Mezz and less Sub, the cash flow shortfall would be greatly reduced. A 100% Mezz deal would actually manage to pay the Senior holders in full.
The problem in trying to model losses in ABS CDOs is that even the most minute change in structure, default rate, recovery rate, and default timing makes a giant difference in CDO performance.
So when I finally finish my look at AMBAC, I'm going to assume the worst for all their ABS CDO, but something more modest for other CDO exposures. I'm also going to assume defaults come in at extreme levels for RMBS deals, but given the analysis above, I think those losses will be manageable.
Disclosure: No holdings in any bond insurer directly. I own various municipal credits which have been wrapped.
35 comments:
what a great post.
Second that comment above. You also write well with touches of humour (eg.Confederate notes) :)
As someone who is looking to put a huge chunk of his portfolio into Ambac, I look forward to your final conclusion.
Great post.
Ambac seems to think that losses stop at 20%, magically (or 22% to be precise, as per their call). So if the market is projecting losses of 19.9%, then THERE IS NO NEED to mark down their CDO's, because EVERYONE knows that losses will never reach 20%.
I'm exaggerating, of course, but the point is valid: ambac seems to live in a world where volatility is "bound"; that is, higher expected losses should not lead to higher expected volatility of losses. "We'll go a little ways down the tail of the distribution," they say, "but we'll get off at 20%, thank you very much."
Things don't work that way. The market marks down AAA assets because of a higher expected median AND volatility. Ambac can't pretend that the starting point of the discuccion is that 20% is the max loss no matter what.
I can't believe I actually understood that. Amazing.
DCRogers
Moin from Germany,
thanks!
Thanks for all the kinds words. As for AMBAC's estimates of defaults, I'm going to use my own estimations. I think one problem we're going to have is that a few deals will suffer 50% and but most might only suffer 10%. This will create a different overall loss profile than all deals suffering 20%.
Another fantastic post. Thank you.
Two questions if I may...
What happens in the event of a technical default like State Street's Carina - does the CDS have to pay out?
On the MBIA conference call they mentioned their non-CDS insurance policies. Are these for their municipals or are some written for ABS/CDOs?
Again, thanks for a great post.
I suspect MBIA is talking about their muni positions when saying non CDS holdings. That remains the overwhelming share of MBIA's business.
As far as a technical default, I think on a CDS-style insurance policy, nothing would be paid out. My understanding is that the contracts obligate the insurer to make up for principal and interest short falls. If its only a technical default, there isn't any shortfall to make up. I'd suspect the same is true with muni insurance as well.
Very good post - easy to understand, but right as far as the big picture goes. Technical correction: Ambac's CDS don't pay on just any principal shortfall; as they say in their description of their exposure, "Similar to an insurance policy
execution, pay-as-you-go provides that we . . . only pay principal shortfalls upon the earlier of (i) the
date on which all of the assets designated to fund the referenced obligation have been disposed of and
all proceeds of those assets have been fully distributed to note holders and (ii) the legal final maturity
date of the referenced obligation." In other words, they basically pay at maturity, as with munis; but in the case of a CDS (unlike a muni wrap) maturity can be accelerated to liquidation of the CDO. I think this is the standard bond insurer CDS execution (but have no direct knowledge except as to my former employer).
You're quite correct: no payment on a technical default. Unless, of course, it's followed by acceleration, liquidation and a shortfall, which is very unlikely: usually acceleration isn't triggered by a technical default, and such a provision would be resisted by a sane bond insurer (such as my former employer, which permitted acceleration only with its consent).
I defer to your expertise on this. I understood that if some of the underlying assets are written down, then the insurer might have to make up the difference. But that doesn't really make sense for a CDO. Maybe on a straight ABS. Anyway, the big picture story is the same, as you say.
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Things don't work that way. The market marks down AAA assets because of a higher expected median AND volatility. Ambac can't pretend that the starting point of the discuccion is that 20% is the max loss no matter what.
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David,
I disagree. I'm not sure why volatility has anything to do with what their actual losses will be. The way insurers mark down CDO losses is totally different from hedge funds/investment banks/etc. In some sense the write-off by the bond insurers is almost meaningless. What really matters is what the actual loss will be in the end, rather than the path taken by the CDS for a CDO.
Having said that, it all comes down to whether you think the current market expectation is going to turn into reality or not. If Ambac says, say, 20% loss what they expect then one needs to decide if that is realistic or not. Hopefully once AccruedInterest runs his tests, we'll get some rough idea of some possibilities.
I might be a bit biased since I am thinking of investing in Ambac, but the reason I'm a bit skeptical about your argument is because I think there is irrational behaviour in the credit markets right now. If one thinks that irrational pessimism is leading to grossly inflated losses then sticking with a 20% loss rate may not be unrealistic.
I'll finish off by saying that there are other issues that will impact the insurers. HSBC just indicated that delinquencies and defaults are increasing for credit card debt and things like that so that is another concern (I'm not sure how much of that is insured by the monolines)...
AI,
You're right that bond insurers pay on writedown of assets in certain limited situations - the only one I can think of offhand is MBS tranches that can get formally written down in order to avoid shortfalls of interest payments to senior tranches. (In that case, they get reimbursed from any subsequent write-ups, which in the old days were fairly common in the rare event of a write-down, if you follow me.) Such write-downs were guaranteed under insurance policies as well as CDS.
But formal write-downs didn't occur for CDS written on CDOs, at least when I was working in the area. The bond insurers stuck to the senior/super-senior tranches, which wouldn't have had write-down provisions even if they'd been common in CDOs.
Sorry for the technical complexities. That's why the IBs got paid the big bucks, right?
what about the flip side of this issue? It would seem that ABK stands a good chance of having its own debt downgraded by Moody's, etc. Does the Ambac business model depend on a AAA rating?
socalstew,
Yes, Ambac's business model depends on a triple-A rating. But it's extremely unlikely they'll lose their rating.
As AI shows, it's extremely unlikely they'll be downgraded due to actual payments on insured securities. That leaves downgrade due to increased capital requirements resulting from downgrades (not losses) on insured securities. Two things: First, Moody's and Fitch have both ranked the bond insurers based on the likelihood that they'll require more capital to prevent a downgrade, and neither of them thinks Ambac is likely to need to raise capital. Second, if they had to raise capital, they would (and they'd be able to in any but an economic meltdown scenario).
Sivaram,
My point is that if you assume an insignificant probability of losses above 20%, then OF COURSE ambac will not experience losses.
But why assume that loss ceiling? Ambac says its because no one forecasts that it will be higher. That statement is incorrect: the market is assigning a meaningful probability to >20% losses. Ambac's response is: since no reputable economist/analyst forecasts higher than 20%, then THE MARKET MUST BE WRONG.
I think this is amusing because New Century used to make the same argument about losses exceeding 5%.
What level of losses we expect depends on severity. If you assume house prices cannot fall more than 10%, then a 30-50% severity and a 40% default rate gives you a 16% loss. Now assume house prices decline by 20%: losses rise to 25% (using the upper bound of defaults). Ambac presumably thinks this is an impossibility. The market disagrees.
Thanks for saying that David - that was my thought exactly and is the Achilles Heel of AI's argument.
Knowing that marginal borrowers like subprime and their exotic Alt-A brethren accounted for the bulk of the idiotic price run-up in this monstrous RE bubble, they will similarly represent the bulk of the losses. Put another way: all of these folks were buying RE when traditionally they shouldn't be. There's a reason they shouldn't be buying RE, they are an unacceptable credit risk.
I'm thinking more along the line of 80% default, where the subprime/Alt-A borrower that manages to NOT default is the exception. In this scenario, Ambac is toast and I have puts on them.
AI and all -
Appropos here, not mine (commentary from http://us1.institutionalriskanalytics.com/pub/IRAMain.asp):
Speaking of spillover, we hear that the three largest ratings agencies are under a full-court press by regulators and the Treasury not to downgrade the "AAA" ratings of the monoline bond insurers, a situation reminiscent of when former Treasury Secretary and then Citigroup Chairman Robert Rubin tried to prevent Moody's (NYSE:MCO) and S&P from downgrading Enron. By the way, our Maximum Probable Loss for C's lending operations was 400bp as of June 2007, but we expect to see C's actual losses from lending reach that level by mid-2008 vs 110bp as of Q2, a level of loan defaults comparable to the early 1990s. Think Bob Rubin can swim in water that deep?
Gillian Tett of the Financial Times, notes that Fitch is openly forbearing on a downgrade of both Ambac (NYSE:ABK) and MBIA (NYSE:MBI) by giving each "a period of time in which they can
raise fresh capital to avoid downgrades." Good luck selling that paper.
With credit derivative swaps for the "AAA" rated debt of MBI and ABK
trading in the 300-400bp range, the markets are telling investors that these are really "BB" credits. Caught between regulators and politicians, on the one hand, and their shareholders and the trial lawyers on the other, the Sell Side ratings agencies and auditors of the big banks are living in a world of pain.
For the record, 80% is way too high, in my opinion. I don't know how you're figuring that.
Maybe 20% is too high or too low. I'm testing AMBAC based on the theory that subprime and prime loans made in 2006 and 2007 triple their previous all-time foreclosure rate. I'm further assuming zero recovery on HE and very weak recovery on firsts.
There's no point in testing AMBAC (or any one exposed to subprime) at "normal recession" default levels. Even if by some miracle that's what winds up happening, the point is to stress them as much as is reasonable. You shouldn't get a AAA/Aaa rating if you only survive "normal" default spikes.
Anyway, hopefully tonight or tomorrow I'll post my findings on AMBAC then you can judge for yourself.
Thanks to all for posting. I especially appreciate the posts by David Pearson and Darth Toll since dissenting views sharpen my view :)
Wasn't the default and foreclosure rate lower than 20% during the Great Depression? The current housing boom is unprecedented so rates may be slightly higher. Anyone know where I can get the foreclosure and default rates stretching back to the 30's?
As for the CDS market, I personally don't put much faith in it. I'm just a newbie but my impression is that the CDS market is unregulated and possibly illiquid. It wouldn't surprise me if there is excessive bearish speculation right now. I remember CDS on GM bonds spiked a few years ago but turned out to be a bad signal. Since my thesis for considering Ambac is that there is irrational negative speculation, I think it is better to rely on the actual economic and business conditions than on what is happening in the CDS and equity markets...
Siv:
Any thoughts on Soros's Theory of Reflexity and how it relates to ABK CDS spreads?
"You shouldn't get a AAA/Aaa rating if you only survive "normal" default spikes."
I agree with this 100% and that is why the ratings agencies have lost all credibility. This ain't your daddy's AAA rating. I consider the ratings debacle one of the biggest problems of this structured finance meltdown. The ratings have to be accurate and conservative, they must be for the entire system to function correctly! And so far it looks like they are neither. This is the fatal flaw in the structured finance world. We are in unchartered territory here.
As p. jackson mentioned, the markets have already determined that a BB rating is more appropriate for these guys and that should be telling you something right there. What is a "normal" default rate for BB?
What I find bizarre is that you can pool together a bunch of crappy subprime and stick a AAA rating for the senior tranche based on cash flow. This implies that 85% will survive default! There is no way that will happen. Have you ever met any subprime borrowers? If you have, you know this argument is a non-starter. Sometimes you financial guys are so smart that you lose the common touch. Look at the quality of the "average" subprime borrower. I know several and they are ALL on their way to default. Every one of them without exception has either defaulted already or is several payments behind, buried in credit card debt as well as car payments and other liabilities.
Its impossible to give solid data concerning this because this is literally the first time we've had subprime borrowers in huge numbers. Traditionally banks wouldn't lend to these people because they considered them a high default risk! By high I assume more than 20% default rate. It may not be 80 but it sure as hell isn't 20 either. JMHO. Love the blog, btw and I always learn a lot here.
Alliance Semiconductor is a very small company that took a pretty big 20% hit in share price today based on the following AMBAC-related disclosure in their 10-Q. Just wondering if you have any thoughts? Thanks -
In addition, at September 30, 2007 we held $59,425,000 in asset-backed securities issued by sub-trusts of two master trusts, Anchorage Finance Master Trust and Dutch Harbor Finance Master Trust, and guaranteed by a subsidiary of Ambac Financial Group, Inc. The rate of interest paid on these securities is determined at auctions generally scheduled every 28 days. If the amount of securities submitted for sale exceeds the amount of purchase orders in a particular auction, the result is a lack of liquidity and an increased rate of interest due on the securities with respect to that auction. This has been the case in several recent auctions, and we are uncertain as to when the liquidity relating to these asset backed securities will improve.
Anonymous,
I'm not familiar with Soros' theory of reflexity. I just looked it up and I don't really understand it. I don't know much about Soros and am not influenced much by him; I'm more influenced by contrarians like David Dreman (although he says CDOs are toxic waste and not to go near the debt insurers) and value investors like Buffett, Munger, Martin Whitman (he has a big stake in Radian, a AA-rated monoline), etc.
To me, a lot of this seems like irrational pessimism. Do note that I'm a newbie and don't have much experience (I also don't work in this field so it's all opaque). I have a bad habit of comparing everything to what Buffett does but it almost seems like the current situation is like the American Express salad oil scandal in the 70's. Ambac isn't as good as AMEX but it is cheaper (I think AMEX dropped like 50% at that time, whereas ABK is down 70%+). However, the big difference is that the housing situation is unprecedented and it's hard to pin the total losses. To make matters worse, the economy hasn't really hit a recession and if that ever happens, default rates are going to be even worse.
Whatever the hell happens, situations like this seperate the best from the rest ;)
I don't know what's up with Alliance. Why did they own a big auction-rate security? Seems strange.
Auction-rate bonds are just floating rate bonds with no set index rate. I.e., the coupon doesn't reset at LIBOR + X, it resets based on an auction. I think most of them work like dutch auctions, which is where every one who wants to buy sets a price (rate) and every one who wants to sell sets their rate, and then the rate is set where everything clears. Its pretty common in municipals and highly-rated ABS.
It has been brought to my attention that back in day when mortgages were held by banks, there was a good possibility that someone not able to meet their payments could renegotiate with the bank. Apparently, its better to lose profit then to outright foreclose on a borrower. However, with the current securitization of mortgages, theres really too many intermediaries to do this kind of renegotiation. Do you think its possible for the largest CDO and RMBS holders to organize and maybe find ways to renegotiate the underlying mortgages. Even if they could cut the foreclosure rate by 25%, wouldn't it still save them a lot more money than it would cost to renegotiate???
Read this post for my thoughts on loan mods.
http://tinyurl.com/25ynn3
I agree with you, Richard. Not sure of the mechanics of making modifications in secured deals. My understanding is that banks have a limited ability to make mods based on strict guidelines.
Darth: Responding to your "have you ever met a subprime borrower" argument: how do you foot this with the fact that the highest default rate during the 2001 recession was 9%?
Hopefully this thread isn't dead...
When we talk about historical default rates, aren't these generally for the entire market? Are there any relevant default rates for subprime securities?
While I think looking at the depression is potentially useful in developing a worst-case scenario, the depression was a time before widespread use of mortgages. The vast majority of homeowners owned their homes outright. If we face a depression type economic crisis, the indebtedness of homeowners today could make things much worse than in the depression. That obviously isn't a prediction so much as a thought regarding building a worst-case scenario.
Scurvon, good point about mortgages being different during the Depression. I'm not even sure the subprime industry existed in any sizeable form back in the 20's and 30's. Practically no one offered anything to lower classes back then (the middle class was much smaller back then too).
But in any case, I would like to look at the depression number (if anyone can provide it) because it is the absolute worst case. You can argue that the situation is going to be worse than now from a subprime point of view, but the economy won't be. During the depression, the economy was an epic disaster so things would have been far worse back then. So, I doubt you will hit the depression figures now even with a worse housing situation.
As for the depression numbers being general numbers, I agree but from my perspective (this is just from my view) it still provides a guide. If I choose to invest in Ambac, I would want to be sure that they can handle a general shock. Don't forget that people only talk about subprime and CDOs but these companies insure non-subprime as well.
The 9% figure is from the mortgage bankers association and covers subprime mortgages in foreclosure as a percentage of all subprime mortgages. They've only reported data going back to 1998.
I expect we'll see far more than 9% of subprime borrowers facing either default or at least a modification over the next 3 years. I think the best case scenario is that its spread out and we get enough inflation to keep the overall economy pain to a minimum.
I agree that if we actually faced another Depression, it would play out very differently because of consumer debt levels. On the other hand, I think our central bank is more aware of how to deal with debt deflation today vs. 1930.
You left us in suspense, wondering how that Ambac analysis turned out!
what happens to the principal the senior is owed in your analysis here? Am I missing something? Large principal payments that cannot be defered to say the legal final of a deal are what would kill the monolines, not the interest payments.
to follow up .. in the ABS CDO example..i agree with the interest calculation, but what happens to the 80 million principal the senior piece of the abs cdo is owed? Where does that come from?
I think a distinction should be made between principal short fall and implied write down. Principal shortfall can be paid by protection seller at effective maturity, as reality-based-lawyer pointed out, whereas implied writedown will be paid immediately. So in this case as actual write downs occur in the underlying deal, implied write down will lead to losses at monolines. Currently, actual cum losses are only still on less than 1.5%, so majority of CDO SS should not be hit yet due to losses. The question is where banks are marking AAA CDO pieces, assuming monolines mark them the same. That will be telling of how much puking will be caused by monoline losses and subsequent monoline/cdo tranche downgrades.
It won't have effect in actual fact, that's what I suppose.
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