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Originally Posted by haha
I love it! You couldn't make this stuff up. 
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Actually it is even worse than this. Bill Ackman is a long time bear on MBIA and AMBAC and has been screaming about there abuses for a while. He has a long held short position on both companies and evidently will make $500 if the go belly up (he said he will donate the profits to charity!!)
This an excerpt from a recent open letter he wrote to credit rating liars agencies. The whole letter is long but interesting.
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Your ratings of the bond insurers are based on the bond insurers’ net credit exposures. That is, you reduce their credit exposure by those exposures that have been reinsured. This is best understood by example.
As of September 30, 2007, MBIA has re-insured approximately $80 billion of par value
of its exposures. More than $42 billion of this reinsurance was purchased from Channel Re, a Bermuda- based reinsurer whose only customer is MBIA. The two most senior officers of Channel Re are former executives of MBIA. MBIA owns 17% of the company and has two representatives on Channel Re’s board of directors.
On recent conference calls, Moody’s and S&P have stated that they have not yet updated their ratings of the monoline reinsurers including Channel Re. Earlier this week, on January 16th, Partner Re and Renaissance Re, the majority equity owners of Channel Re, wrote off the entire value of their investments in Channel Re due to losses it has recently incurred that substantially exceed Channel Re’s capital, an impairment that Channel Re’s two majority owners have concluded is “other than temporary.”
Despite the fact that Channel Re has negative book equity and $42 billion of MBIA’s credit exposure – $21.5 billion of which is CDOs of ABS or CLO/CBOs – Moody’s and S&P continue to rate the company Triple A with a stable outlook. Fitch does not rate Channel Re and apparently relies on S&P’s and Moody’s stale Triple A ratings in its
analysis of MBIA’s capital adequacy.
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Shades of Enron.
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