Australia Sees Biggest Surge in Borrowing Since 1980

February begins with a reprieve. Bond insurer MBIA told American investors it had more than enough capital to keep its triple A credit rating. The company still lost US$2.3 billion in last year’s fourth quarter (or $18.61 per share). But the big worry is that if MBIA loses its ratings, the US$652 billion in bonds it guarantees might have their ratings reconsidered by S&P, Moody’s, and Fitch.

For its part, S&P says losses from securities linked to sub-prime mortgages will be US$265 billion before it’s all over. Seeing as how we’re at US$90 billion in bank losses already, that means we’ve got just US$175 billion to go.

You have to take these loss estimates with a handful of salt. After all, this is the same ratings agency that slapped the highest credit rating possible on sub prime debt to begin with. But there are obviously more losses in the pipeline for banks, brokers, and bond insurers. A study from J.P. Morgan says bond insurers have at least US$41 billion in losses to realize, and that a downgrade of the bond insurers would force banks to write down another US$70 billion.

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