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Ambac (NYSE: ABK | Quote | Chart | News | PowerRating) posted a net loss of $2.4 billion due to mark-to-market losses from collateral debt obligations in its asset-backed portfolio. And MBIA (NYSE: MBI | Quote | Chart | News | PowerRating) stomached an $806 million net loss in the quarter as mortgage default rates increased, and forced it to increase reserves for its residential mortgage-backed securities or RMBS portfolio. MBIA's revenue fell 25% to $319.8 million, while Ambac's $2.32 billion revenue was in negative territory.
The companies say the losses do not threaten their solvency, although both are hoping for federal government intervention to provide liquidity to the capital markets and stabilize the housing market.
During an earnings conference call, Ambac reiterated its position that the company?s problems are systemic to the financial industry, and that it?s in the interest of taxpayers to include bond insurers in the Treasury Department?s Troubled Asset Relief Program provisions.
?We believe absolutely that we are systemic. I'm talking about the industry. This is an Ambac begging bowl,? said David Wallis, Ambac?s chief executive officer. ?Why are we systemic? Well, I think we all know our place in the municipal industry. I think also there are other effects. There are effects upon the holders of insured debt and counterparties.?
Wallis argued that the Treasury Department should take more interest in companies that have a chance of surviving. ?Clearly, it's not in the interest of taxpayers?to prop up a failing institution. We think our issues are liquidity, not solvency?Treasury and others need to be persuaded of that fact because they don't want to throw good money after bad.?
Unlike Ambac, MBIA does not seek direct assistance from the government. ?As long as the government is successful in achieving its objectives to return liquidity to the capital markets and stabilize the ultimate housing market, we should experience lower losses on our insured credits,? Jay Brown, the company?s chairman and CEO, said in a statement.
MBIA has filed suit against two large mortgage lenders of its second lien RMBS due to alleged negligent and deficient lending standards. Brown said MBIA is hoping to ?recover a significant portion of the harm that we have already suffered? through the lawsuit.
On the afternoon of Nov. 6, MBIA's stock was trading at $7.75 a share, down 5.27% from the previous close. Ambac's shares were trading at $1.59 a share, a 21% decline from the previous close.
(By David Dankwa, senior associate editor, BestWeek: David.Dankwa@ambest.com)
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