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What: Shares of bond insurer MBIA
So what: On its face, this news sounds really bad. It sounds like MBIA may not have the liquidity to meet its debt payments and could be on the verge of default or even bankruptcy and NYSDFS is stepping in to protect policyholders. Reality isn't nearly as ugly.
What's true is that NYSDFS is looking out for policyholders and wants to make sure that they're covered. It's also true that MBIA still isn't in tip-top shape overall. However, as the company's press release makes clear, the payment on the notes simply isn't due if NYSDFS doesn't approve the payment -- thus, no default. Further, as MKM Partners analyst Harry Fong pointed out in a research note, it does appear that MBIA has enough liquidity to make the payment.
Now what: If nothing else, this is a reminder to investors that MBIA still isn't on particularly firm footing. That said, it doesn't sound like this particular payment issue will have a lasting impact on MBIA whether NYSDFS causes the company to push it back or not.
What investors do need to watch, though, is whether banks, including Bank of America
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Fool contributor Matt Koppenheffer owns shares of Bank of America but has nofinancial interest in any of the other companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter, @KoppTheFool, or on Facebook. The Fool’s disclosure policy prefers dividends over a sharp stick in the eye.