This commentary published today by Jonathan Weil, a Bloomberg News columnist, addresses the topic of this thread.
Bloomberg.com: Opinion
In my original post, I speculated about the possibility of closed loops, where a small group of institutions claim to insure each other. Actually I was imaging too complex a structure. It seems that one institution can insure its own capital.
"At Sept. 30, MBIA said it had a $37.7 billion investment portfolio, including $24.5 billion of holdings rated AAA. Yet $5.1 billion of those investments were rated AAA only because they were insured by MBIA."
ExHermit
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