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2 of 2 people found the following review helpful
5.0 out of 5 stars THE GRAVY TRAIN CRASHED!, 27 Oct. 2010
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DOPPLEGANGER (TEDDY B) - See all my reviews
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Christine Richard writes an excellent insight into bond insurers and how they were brought down to earth by one man, Bill Ackman - a hedge fund manager who fought a long and at times 'bloody' battle to bring the financial community's attention to deliberate major under-reserving of potential losses in the largest company in this line of insurance, The Municipal Bond Insurance Association (MBIA).

At first, Bond Insurers were on to a good little earner, by stuffing enough money into their capital account to attract a Triple A rating from Moody's, Standard & Poor's and Fitch rating agencies, and then offering to guarantee municipal bonds thus endowing each bond 'underwritten' with a AAA rating making it easier and cheaper to attract investors. As it was virtually unheard of for a municipality to be allowed to 'go bad' on the interest or capital repayment of one of its bonds, the risk to the bond insurer was effectively non-existent and only attracted a modest premium.

So far so good. But then greed entered the arena and the bond insurers looked to other classes of lending to guarantee, thinking their money- making formula was watertight. Alas they chose bonds securitised with risky mortgages and dodgy credit card loans, which without their AAA rating would have proven much more difficult or impossible to market.

Bill Ackman's research discovered that MBIA were not acknowledging the much greater incidence of bad debt and therefore potential claims, that this type of debt was incurring when the economy started its 'credit crunch' nosedive and that the company has heading towards disastrous unreserved losses. Yes, as a Hedge Fund Manager he sought to take advantage of what he was confident of, viz. massive losses causing MBIA's shares to collapse, by taking short positions that eventually made him huge profits. However, starting in 2002 he became extremely active and vocal in bringing everyone's attention to what he considered was a conspiracy by MBIA to reveal the true extent of these losses thus fraudulently putting existing and future shareholders to a severe disadvantage.

As in many other similar cases of 'whistle-blowing'recently, notably Harry Markopolos in connection with Bernard Madoff ("No One Would Listen") and David Einhorn and Allied Capital ("Fooling Some Of The People All Of The Time")
the SEC chose not only to ignore the timely and accurate warnings but launched a series of 'spiteful' retaliatory actions against those bringing the facts to its attention. Strange and incomprehensible. The delay occasioned by the SEC refusal to take heed of these various dire warnings cost investors an estimated extra $44 billion of losses in the Madoff fraud and countless $billions in the cases of MBIA and Allied. And we all thought The SEC was on our side!

An extremely well written and researched book, easily understood by a comparative layman, giving an excellent understanding into the workings of the municipal bond market but alas little or no confidence in the governance of the regulatory bodies supposedly there to protect investors.

Quoting from a review of this book by noted financial author Frank Partnoy, "Finally, a financial crises book with a hero..........Ackman emerges as the Don Quixote of financial markets: you will root for him and a happy ending."
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1 of 1 people found the following review helpful
4.0 out of 5 stars Accurate - but quite one sided, 20 Aug. 2010
A comprehensive and accurate telling of what many consider the first chapter of the credit crisis - a prelude to Bear Stearns and Lehman. The book is slightly one sided in its analysis, as it is about Ackman rather than the monolines. This is probably the biggest weakness. There were plenty of reasons the monolines did make sense, but this doesn't fit with the story and instead it focuses on Ackman and his views. The initial reasons for Ackman shorting the monolines were his views on muni insurance, not CDO's of subprime. Ackman remained dogmatically short of Ackman and was ultimately proved right, but not for the reasons he originally seemed to set out.

In part of the book the actions of MBIA are characterised as being underhand when they threaten to no longer insure a municipalities issuance if they don't stay current on the existing debt. This is rather missing the point of the monolines, after all why would you continue to offer to insure debt issuance if the municipality (or related municipality) has a history of default. Ultimately the insurance was for the benefit the debt holder, not the issuer. The issuer did however benefit from a lower cost of issuance.
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5.0 out of 5 stars Great account of Bill Ackman's long term short position on ..., 16 Mar. 2015
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Great account of Bill Ackman's long term short position on MBIA. Author Christine Richards is now working as part of Ackman's team working on his short position on Herbalife.
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5.0 out of 5 stars best finance story covering the 2008 crash, 4 Jan. 2015
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This review is from: Confidence Game: How Hedge Fund Manager Bill Ackman Called Wall Street's Bluff (Bloomberg) (Kindle Edition)
Well researched and written, and puts you in the seat of Ackman in researching and hanging onto a big trade - makes you think ... Would I have had the stamina...?
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5.0 out of 5 stars Great book, 24 Feb. 2013
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Great book giving a solid background to Bill Ackman's career whilst providing colour to the run up 2007/2008 credit meltdown
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