Last week I was looking over the headlines at Market Watch for interesting articles about changes in municipal finance. What really looked out of place was a piece written by Alistar Barr titled Regulators try to ease selling pressure on muni's.
The fact that this article ran on June 2, 2008 begs the question where has the National Association of Insurance Commissioners been for the last eight months!
On October 13, 2007, Penn State was trouncing Wisconsin 38 to 7. AMBAC's stock price had closed the prior day at 68.96, down from a high of 96. But anyone who was aware of the financial markets knew the monoline insurance companies were in serious trouble. You don't lose a third of your market capitalization without some sort of alarm going off.
The National Association of Insurance Commissioners did nothing.
Fast forward to January 1, 2008. AMBAC's stock price has now fallen to 26, having lost about 75% of its market value in less than a year. And Wisconsin was on the losing end in the game with Tennessee.
By now everyone knows there are major problems with municipal bond insurance companies. The market for municipal bonds is freezing. Liquidity is vanishing.
The National Association of Insurance Commissioners did nothing.
But here on June 2, 2008, we are to believe that the Association is going to save the day by assigning its own credit ratings through its Securities Valuation Office ("SVO").
Just think of how much more credible the action would have been had the Association made its announcement in October. Better yet, how about a decade ago.
I'm sure the market awaits the time when the SVO assigns a rating to a municipal issue higher than the rating given by Moody's or S&P. Maybe it's time for a little long range planning on the part of the Association.
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