If you had any doubts that the Monolines (Ambac, MBIA, FGIC) were f$%#ed before, well, they should be totally eliminated from your mind now. Consider the 3 body blows they have taken over the past week:
First, the non-offer offer from Buffett. It is astounding that some people thought of this as a bail out for these firms from Warren. It was nothing of the sort — indeed, this was merely a sales pitch from an insurance man: "We’ll reinsure your Municipal Bonds a 4X the rate you originally did."
The response: "No, thanks."
My opinion: Buffett never expected these guys to accept his terms. This was a clever, showboating tactic to show the state insurance regulators that Berkshire Hathaway (BRK) stood ready to step into the role of guaranteeing Muni bonds across the country. Call it a ploy, declare it a hollow gesture — but recognize that it is a brilliant strategic move designed to checkmate the Monolines into giving up the high return, low risk business Buffett covets (and would do a much better job running anyway).
Second, the NYS Commissioner of Insurance has suggested splitting the Muni bond business off from the rest of the firm. What’s left is can best be described as a poorly run, derivative hedge fund led by people who have no business running a hedge fund of any sort, much less one of the poorly run derivative variety. But the fact that the NYS insurance commissioner is suggesting this should tell you that this has reached a level of government involvement that cannot bode well for our friends at ABK, MBIA and FGIC
(Its almost an irrelevant afterthought that Moody’s downgraded FGIC, pulling their triple-A credit rating today).
Now, the coup de grâce: The FT reported that Eliot Spitzer, former NYS Attorney General, now New York governor, gave the bond insurers three to five business days to find fresh capital, or face a potential break-up by state regulators who want to safeguard the municipal bond markets. Oh, and that was BEFORE Moody’s cut FGIC from to double AA — effectively ending their ability to write muni bond business.
~~~
As I noted on CNBC Tuesday, these firms have become financial terrorists, holding the muni bond business as their hostage. They know what happens to bank robbers and bad guys once they let the hostages go — they get riddled with bullets. If it wasn’t for this end of their business, no one care on whit about these guys — they are just another hedgie that blew up.
Gee, anyone still think Wilbur Ross will be riding to the rescue anytime soon . . . ?
>
UPDATE: February 15, 2008 6:27am
In response to several questions raised in comments, let’s delve a bit deeper into the "Why."
Understand that this is not just any business; This is an extremely regulated insurance business that exists solely to facilitate capital raises by States and Municipalities to build State facilities for the public good.
They operate by the good graces of the State. No State approval, no business.
If the larger, more influential States — NY, California, and especially The Port Authority of NY/NJ — say, WE NO LONGER TRUST YOU, your recklessness has endangered our ability to raise funds thru bond issues to build schools and hospitals and bridges etc., then it is game over.
That is what is happening now; NY State wants to cleave off the all important muni bond business — and leave the reckless, irresponsible portion to live or die on its own.
>
Previously:
Counter-Party Risk
http://bigpicture.typepad.com/comments/2008/01/counter-party-r.html
Monoline Insurance: There’s a New Sheriff in Town… http://bigpicture.typepad.com/comments/2008/01/monoline-insura.html
Sources:
Monolines given five days to find funds
Aline Van Duyn in Washington and Michael Mackenzie in New York
FT, February 14 2008 14:54 |
http://www.ft.com/cms/s/0/3b313712-db09-11dc-9fdd-0000779fd2ac.html
NY regulator: Bond insurers may be split up
Dan Wilchins and Patrick Rucker
Reuters, Thursday February 14, 2:56 am ET
http://biz.yahoo.com/rb/080214/bondinsurers_dinallo.html?.v=1
I hope y’all caught this already, but this is pretty crazy…
About the super high rates for debt borrowers including Port Authority…
http://www.nytimes.com/2008/02/15/business/15muni.html?ref=business
Barry,
I am stretching to see how the State of New York could mandate a split off. There are preexisting contracts in place, maybe prevent future insurance? The fed would have a lot more power to toke global action, but where does New York get its power? Think like a lawyer here.
Thanks.
Just a thought, but in the convoluted credit default swap area with it’s presently skyrocketing premiums, has anyone of these government regulators looked at premiums for captive insurance in Vermont? If the profit laundering raquet 44 of 100 fortune 100 corporations are running through Vermont turns out to be using under capitalized wholly owned shell corporations, the rule changes that since 1999 allowed employee pension and medical insurance scams (I mean plans) to collect the premiums may turn out to be a huge capital loss for the employees. Wells Fargo comes to mind. This is not chump change.
The whole point of Vermont captive insurance procedures is to give corporation large state tax breaks in return for 2% added income for the state from all these outside corporations. The catch for workers is that the premiums are jacked up with no regulatory oversight because the reinsuring captive insurance corporations are technically “offshore” for tax purposes. While the corporations claim this lowers their cost of reinsurance, it actually does the reverse by increasing expenses for employees and shareholders while fabulously enriching the executives or board members who own the shell corporations.
It all worked great most of the time because the captives weren’t required to cover hardly any losses since they don’t kick in until a significant hit comes along. Well, Wells Fargo, Aetna, Blue Cross, large oil corporations and many many other of the S&P 500 are in on this and the reinsurers (captives) are now supposed to come up with the money being lost in the billions. Do they have it? Ask the Governor of New York. I don’t think so. This may be the next blow up among S&P 500 corporations. It could get really ugly.
I never thought Wilbur Ross would come into the rescue, nor did I think anyone else would. Personally I hope the government doesn’t spend our tax dollars to bail out the non-muni part of the business.
I’ve felt that the monolines were F@$!K#D for a while now, but it’ll take a while longer to figure hot how F@$!K#D they are :)
I second rick’s question. Now, I am quite ready to these these asshats axed, but, I don’t understand New York’s authority here.
Premier Spitzer is delusional, he’ll have the biggest target painted on his back if he even tries to do anything of that sort.
>>he’ll have the biggest target painted on his back
Anyone who makes waves in Posh Pond will suffer. But it must be done. Hopefully there will be a sincere and honest effort to punish some of the most accomplished predatory sociopaths on the planet.
Insurance is second only to central banking in confidence scams. It’s a rich mans con. I say execute them all, worry about justice later.
“these firms have become financial terrorists, holding the muni bond business as their hostage.”
I have a question: What prevents the municipalities to walk out of AMBAC and MBIA and seek other insurers, like Berkshire Hathaway for instance?
Get ready for the personal attacks on Spitzer to increase. When you hear about it from friends, tell them what’s driving it.
Ladies/Gentlemen, thanks for another episode of “Who’s Really F%*king Who.” Once the public gets knowledge of what is really going on, there is going to be so much social unrest. Better find that cave out in the Hinterland somewhere before it is too late.
Barry,
What are you talking about, the latest Bensteinery(when the Google spelling servers accept this, that is when you know it has arived.) is that it’s all the short sellers.
Ya, it’s Brinkmanship….. with the muni bonds. I’m wondering if spitzer/donalo deadline is in concert with S&P and moodies.
This also reminds me of the Mortgage lenders, and them denying a problem all the way to the end.
My prediction is that MBIA raises some cash, and holds out for 6 more months.. similar to CFC and the BofA deal.
and as the Disheveled look of the Ambac CEO, yesterday… it blows up next week.
Only rescue will be if they submit to the Vultures. Which they don’t seem likely to do.
The downgrade of their CDOs seems almost guaranteed at this point.
Barry, that’s *exactly* why Buffet made his offer, and it was beautiful! Why the brainless media didn’t pick up on the simple logic is beyond me….beyond incompetence. You had the monos getting *very* close with the government, and talk about possible public funds bailouts, etc.. Buffet’s move was to 1) screw that little dance because now how can the govt suggest a public bailout of the monos when there are private funds available, and 2) screw the monos themselves by only offering to buy their decent risks. It’s classic and obvious. Even the NYS CI is now resorting to splitting the monos in half–the good and the garbage–to salvage his role. Pathetic! (Buffet’s move had me laughing….awesome!)
What Ambac and MBIA did was pure incompetence, but I don’t understand why everyone is ok with Buffett taking over the muni business. Why is a federal insurer not created just to insure munis? It seems wrong to allow a corporation to receive massive profits with no(tiny) risk simply because they are the only ones big enough to cover that tiny tiny risk.
Besides, this whole circus has made it very clear that the insurers have more insurance from the municipalities than the other way around, so why does this business even exist?
What prevents the municipalities to walk out of AMBAC and MBIA and seek other insurers, like Berkshire Hathaway for instance?
For future business they can. But as I understand it, premiums for existing insurance contracts were paid up front in full. This is why Buffett asked for a good deal of money to take on the risk of the monolines’ existing muni portfolios — he wants the premiums already paid to the monolines, plus more.
Why is a federal insurer not created just to insure munis?
A better question is how did we get to the point where munis, which have a very low default rate, are generally assumed to need insurance? When you buy an electronic gadget at the store, do you bite on the usual offer to pay more for an extended/enhanced warranty? Probably not. But there is probably a better chance of your gadget crapping out than a muni defaulting. I think this is, in part, the ‘hostage’ situation Barry is referring to: somehow muni issuers have become hostages of the monolines, dependent on their insurance to get the highest rating, which reduces their costs (interest expense).
Can anyone expand on what AGG was talking about above?? Also where are the accounting firms in this mess? I mean these are publicly traded companies. Enron part 2?
Is it legally possible to cleave off part of the business like that? You’d figure that people/creditors with a claim against the company would object. Why doesn’t Buffet just let the AIG and the rest crash to the ground and start a new bond insurance company that has a clean slate?
I must say that a shiver went up my spine when you wrote “They operate by the good graces of the state.” I’m so glad to be part of a controlled economy!
That being said, let’s say Spitzer somehow figures out a way to force the muni bond part to be split off from the rest of the business of these insurers. I guess then that all ratings on securitized products insured by these guys will decline further, leading potentially to greater turmoil in the financial markets.
I guess that doesn’t really affect the Insurance Commissioner though.
(I know, maybe this is exactly what the markets need – I just hope Spitzer has the guts to say that when the Dow is down 1,000 points in a single day).
But the all important question is what happens to the bank’s balance sheets once their CDO is left to die and can no longer coat tailer on a “mirage like” triple A status. Sure the muni bond business may be segregated and somewhat protected, but the toxic CDO cancer will be free to metastasize. So in terms of the stock market, the banks will be facing tens of billions further in losses.
They are the walking dead. The guy from Ambac who was on CNBC yesterday is more full of shite’ than a Christmas Turkey.
Not content with a license to steal with the Muni business, they ventured into the exotic acronym world where they had no business. You are scroomed boys and girls!
Barry no worries because we have a new financial instrument. The Super Duper Senior Note. You can’t make this stuff up. From Calculated Risk:
Super Duper Senior Bonds
I will have you know I did not make that up.
Aside from the small trickle of deals, UBS highlighted a new structuring technique for Alt-A hybrid deals, which involves carving out ultra high-quality bonds out of the super senior triple-A classes and calling them super duper senior bonds.
“Many investors are reluctant to buy MBS backed by Alt-A collateral including super senior paper, as they fear credit losses,” UBS analysts wrote.
In a hypothetical super duper triple-A deal, the bonds have twice the credit enhancement of the super senior triple-A bond and four times the credit support of the straight triple-A bond. After running the structure through hypothetical scenarios, UBS determined that the super duper senior Alt-A hybrids offer great value relative to prime jumbo super senior hybrids and agency hybrids, and virtually eliminate the credit component.
Some market participants, however, were not as delighted with the prospect of the new structure. “I don’t think it will be anything big,” one trader said. “I don’t think anyone is overwhelmed by it.”
I’d think not. “Super Duper” sounds like the kind of thing you hear at a Junior League luncheon (not that I’ve ever been invited to one, you know, but you hear stories). I think they need a better name for this.
Belt and Suspenders Bonds? Belt and Suspenders and Duct Tape Bonds? Belt and Suspenders and Duct Tape and Airbag Bonds? Belt and Suspenders and Duct Tape and Airbag and Flame-Retardant Jammies Bonds? If we’re going to act like we found the recipe for a quintuple-A rating, we might as well be vivid.
“…is more full of shite’ than a Christmas Turkey.”
Posted by: SPECTRE of Deflation | Feb 15, 2008 8:25:33 AM
SPECTRE: I don’t know what they’ve been feeding you on Christmas, but you should check out sage stuffing.
I’ve read that NY State has capital requirements for the bond insurers. Why would they be less than whatever is needed to maintain a AAA rating, esp if they’re writing AAA business?
I drew the same conclusions as you did, Barry.
When municipal debt doesn’t trade, we’re perilously close to Road Warrior time.
So what did some people hear in all this that drove up ABK and MBI double digit percentages yesterday?
I put out a lowball bid on some August puts in MBI that actually got hit yesterday.
The new high rating for bonds:
Double-dog, mega-ultimo, super duper, cross my heart and hope to die, A-1, VSOP, Acme, Forever.
Everything else will be known as ‘Maypops’.
Simple.
How the hell can you say.
“well we want to separate our balance sheet into 2 companies.. the liabilities, and the assets… Then we will let the company with the liabilities go bankrupt”
I’m suspecting this is an unlikely outcome.
If one can get away with this, I have a few business I’d like to take public.. seems like a successful business model.
Maybe there is a way I can buy stock in the asset part of the business, and not the liabilities.
Eric Davis wrote:
My prediction is that MBIA raises some cash, and holds out for 6 more months.. similar to CFC and the BofA deal.
and as the Disheveled look of the Ambac CEO, yesterday… it blows up next week.
Only rescue will be if they submit to the Vultures. Which they don’t seem likely to do.
The downgrade of their CDOs seems almost guaranteed at this point.
Well, you have beaucoup opportunity to put your money where your mouth is.
Aug 08 $12.50 Puts on MBI are trading at around $4.50 or so.
In 6 months, tell us how that worked out for ya.
In regard to Spitzer, Buffet, and the monolines, let’s just be clear. The damage is already done, it was self-inflicted, it will just get worse, and any turmoil in the markets will reflect that. The cause was a lack of regulation by the federal government, and the coziness between government officials and the people who run Wall Street (a revolving door of garbage in, garbage out). The state of New York didn’t create the problem, Spitzer didn’t, Buffet didn’t, and they can’t help the fact that the monolines stinking up the room have gangrene. As far as I can see, neither the munis nor the toxic CDOs are really currently insured. Acknowledging that before the monoline patient is festering and putrid from head to toe should not, and does not make the physician culpable when they lift the bandages and everyone takes in the sight and smell of this horrible mess.
Moin from Germany,
i just have to spread this headline….
via Marketwatch
“Sovereign wealth funds eye bond insurers:NY insurance chief”
When you read headlines like this you know it´s too late….
Game OVER!
Double-dog, mega-ultimo, super duper, cross my heart and hope to die, A-1, VSOP, Acme, Forever.
I like it, but if we want the ultimate protection, shouldn’t it be called a Trojan Super Duper Can’t Fail Senior Note?
SPECTRE:
Okay, I’ll go for that, if you add “Ribbed for your pleasure.”
“They operate by the good graces of the State. No State approval, no business.”
Just about sums up the Federal Reserve, too.
M.A.
That’s gonna cost ya extra. LOL! I also just heard that bond holders will be receiving KY instead of coupon payments moving forward. We want to keep everyone comfortable for their respective bumpy rides.
Look, let’s get real here. Buffet’s offer was not just a grandstanding event — he’s making an outrageous offer in the unlikely event — yes, unlikely though possible — that the monolines completely unravel. He can swoop in and take over the best part of the business from panicked regulators.
It’s the Buffet method, the same method he applied during the Salomon Brothers deal, where he created profit locking convertible securities.
Great deal for me…sucks for you.
That’s the way the Sage from Omaha operates.
Look, I’ve said this before and I will say it again: it’s important to understand the length of the time over which actual economic monoline losses will happen. Think cash here — put yearly claims payments on one side and premium income/portfolio income less expenses on the other side and compare the outcome. Really, keep this in mind: All the mark to market adjustments killing the banks are irrelevant to a bond insurer. The risk the monolines face is whether investors lose principal and interest on the underlying investments and trigger their guarantees. Even if the guarantee is called, the monolines pay out claims on principal only at the original redemption date so the NPV exposure is a fraction of the notional sums insured.
That means you need to look at these monolines as ongoing concern basis and in a runoff scenario. See what happens — even if it means, believe it or not, that these entities can make it as ongoing, though crippled, concerns.
What is the probability of a truly armageddon type of scenario in the housing market and the overall economy? Warburg did exactly this and figured that the conservative value during a runoff for MBIA would be about 30 dollars.
Another way to think about it is this: monline exposure can be compared to a written out-of-the-money put option to protect investors against extreme market events.
Look, I agree — the monoline business model is a complete wreck. And from a cash point of view, it could unravel for them, and fast.
But, to reiterate, so far we have had mark to market losses in a portfolio that is supposed to be kept until maturity. To date all the brouhaha has been about covenant triggers, valuations, and accounting entries — green eyeshade stuff. Of course, the level of capital required to maintain an AAA is far larger than that required to merely assure that claims are paid for the next year or two. But again, that’s a labeling issue, not an REAL economic issue.
The real economic losses will occur when claims are paid.
Perhaps we can get that same Chinese SWF that bought into Blackstone to buy into these monolines….
On second thought, I’m sure Warbug Pincus has some more money to piss down a sewer..
Eric quoted/wrote:
“well we want to separate our balance sheet into 2 companies.. the liabilities, and the assets… Then we will let the company with the liabilities go bankrupt”
I’m suspecting this is an unlikely outcome.
My comment:
On the contrary, this is very common bankruptcy procedure. Bond owners and the parent company salvage what they can, share holders get zero. Fair? It is one rule of the game and you have to play by it.
It’s funny how these things work their way through to the hinterlands:
My little county in Alabama decided that it wanted to save a little money on its interest expense, so a few years back converted about $3 billion (yes, w/ a “b”) of sewer bonds (why we have $3 billion of sewer bonds to pay, ranking us in the top five of counties nationwide in bond indebtedness, is another story) to Auction Rate Securities. At the last auction (held roughly monthly), interest on a portion of those bonds jumped from about 3% to 10%–700 basis points in a month!
The long and short is that there is no way the county can afford its debt service if this keeps up, which in turn, will push up its interest rate even more, which in turn, well…can anyone say Orange County redux?
I’m wondering if we can “jingle-mail” the keys to the county to our bondholders.
But, of course, somebody is apt to step forward and rescue the muni-bond business from its present irrationality.
But like Keynes famously noted, “the markets can stay irrational for longer than you can stay solvent.” This might get interesting.
Reuters headline: TWO CITIGROUP FUNDS HAVE TROUBLES
“Citigroup barred investors in one of its hedge funds from withdrawing their money, and a new leveraged fund lost 52 percent in its first three months, the Wall Street Journal reported on Friday.”
http://www.cnbc.com/id/23180611
Stuart wrote:
On second thought, I’m sure Warbug Pincus has some more money to piss down a sewer..
Whether WP pissed it, or invested it, we will see in due time…
Then again, they have been in business for 40 years, and over that time they have grow to 5,000 employees, and $20 billion in assets.
They make mistakes, but they are not stupid.
Karl K, nice analysis. Solvency & AAA, two distinct issues. Solvency in doubt? Not really.
Barry, I would add that many hedge fund managers are not qualified to run a hedge fund. You may marvel at the dumb monolines, I marvel at an investor that would pay 2/20.
A quick comment on municipal auction rate securities…
These problems are mostly liquidity problems, not credit problems…
Moreover, municipals are about half of the $300 billion mkt. It’s real money, true, but just a portion of the muni market…
But make no mistake…this is a taste of what MIGHT happen is we have a REAL broad based liquidity/credit crunch…
Really, we cannot let THAT happen. You do not want that to happen. To think, as some on here are wont to do, that we need such a collapse to wring the excesses out of the system is, in a word, ghoulish…
Re credit ratings and downgrades, is it not odd that we accept to do business with sub-AAA banks but when other sectors of financial intermediation go below that rating we consider them quasi-bust.
Also my experience with insurance claims in general leads me to expect that the legal departments of the monolines will be searching hard to find grounds to attack originators of mortgage packages (and their liability insurers). That may not let monolines off the hook with bond holders, but it may help to share the pain with the rest of the insurance and reinsurance industries…
Some still wonder what will happen to MBIA share values I guess if they are shut out of the muni market. Hint: flush.
“They make mistakes, but they are not stupid”
One thing that’s for damshore is they can’t read a chart.
If I read Dinallo’s (NY Insurance czar) testimony correctly, it appears that he, in addition to having already asked Buffett to start a muni business, also specifically asked/told him to make the reinsurance offer.
From pg. 3 of:
http://www.house.gov/apps/list/hearing/financialsvcs_dem/dinallo021408.pdf
“It was to ensure a safety net for the municipal bonds that over the Martin Luther King
Day weekend in January we asked Berkshire Hathaway to price the entire municipal
bond portfolio of the three largest bond insurers. Earlier this month, Berkshire sent its
proposal to the three companies. I believe that there may be other investors who would be
interested in investing in the municipal side of the business.”
Rick Said:
>Barry,
I am stretching to see how the State of New York could mandate a split off. There are preexisting contracts in place, maybe prevent future insurance? The fed would have a lot more power to toke global action, but where does New York get its power? Think like a lawyer here.
>
Insurance companies are regulated state by state to protect policy holders. They are usually required to have x amount of capital and have guidelines to restrict dividends to the parent company when capital is insufficient as well as other powers including shutting them down.
There is also precedent set by Connecticut and NY to litigate against these businesses.
Rick Said:
>Barry,
I am stretching to see how the State of New York could mandate a split off. There are preexisting contracts in place, maybe prevent future insurance? The fed would have a lot more power to toke global action, but where does New York get its power? Think like a lawyer here.
>
Insurance companies are regulated state by state to protect policy holders. They are usually required to have x amount of capital and have guidelines to restrict dividends to the parent company when capital is insufficient as well as other powers including shutting them down.
There is also precedent set by Connecticut and NY to litigate against these businesses.
Hey whats wrong if Municipalities can raise funds thru bonds? I say that is GRRREEEAAT!
We are taxed too much already
Government is the biggest bunch of thieves around!….The Monolines are Angelic saints compared to them!
Boo Hoo…We can’t build that over-priced school we don’t need for a public education system that is failing
well actually you are wrong somewhat. the money raised for the public good is not for the public good. it is to keep certain parties at work all the while greasing the treads of the local political establishments with kick backs and political favors. so when this gravy train is stopped, certainly the criminal enterprises get pissed off real fast about it and start whining.
Zachattack wrote:
One thing that’s for damshore is [Warburg Pincus] can’t read a chart
You mean instead or doing the sort of thing they typically do — read contracts in detail, review financial statements and models, talk to hundreds of knowledgable people — they should look at random squiggly lines on a single piece of paper?
Is that right?
Then again, they have $20 billion of assets, and you don’t.
MBIA and Ambac got into trouble because of bad decisions they made, of insuring riskier CDOs and CDO-squareds. They should never have been AAA in the first place. If a company’s core business is threatened only by them losing the top credit rating, they don’t deserve the AAA.
On the other hand, this became a political thing now. Dinallo follows the steps of not-so-ethical Spitzer, who followed not-so-ethical Giuliani. Just like Spitzer wrongly destroyed the business of the insurance brokers, Dinally is about to destroy the bond insurers, for the benefit of Pershing Square and other hedge funds, not to ‘protect policy holders’ like it has been said.
Friday wake-up call…
I’m one of two executors for an estate that recently held $17,000,000 of high-grade munis. Preparing for distributions and tax payments, we (the executors) told the broker to convert the munis to cash over the second half of 2007. This is where the problems began. With no discretionary authority the broker put the entire $17,000,000 into auction-rate notes (several of which have failed) The broker viewed these as equivalent to cash. NOT!
Now Wachovia (the broker)refuses to send any updates or statements. The compliance officer says the broker can communicate by phone, but not in writing. Absurd!
The current freeze-up in the little-known but important “auction rate” debt market now makes me personally liable for $17,000,000.
I want me some Super Duper whatchamacallits, n’ some jellly beans too. Yep, I’m the new Reagan
Well the state regulator can make a claim on the monolines, but that does not mean that other policy-holders (in the cold) will just go along with it.
Say I was paying for insurance on something other than munis. How on earth could I take this lying down? I would sue everyone, and demand my contract be affirmed.
So it seems highly unlikely we can have a clean split. One way or another, we have to face the fact that these guys have more claims than they can honor.
This looks like another negotiating ploy to me. The good / bad split does not look like a logically tenable solution at all.
Here is reassuring news from AFGI.
AFGI is the association of MONOLINES. This is an excerpt from the AFGI web site:
http://www.afgi.org/who-fact.htm#claims
Our Claims-Paying Ability.
To test the adequacy of our companies’ capital resources, the rating agencies apply a computer-simulated stress test which measures our ability to pay claims at a default level comparable to that of the Great Depression.
I wonder if anybody has looked at the implications of the inevitable losses of CIFG on the two French banks that now owns it.