The recent decision by some prominent investment rating agencies to maintain their top quality AAA ratings for some of America’s most troubled bond insurers has worried us to say the least. Although some agencies such as Fitch Ratings have been sensible enough to downgrade bond insurance companies like Ambac Financial, others are still grading these companies as top quality investments.

We view this as a drastic judgement error on the agencies part. These bond insurance companies have insured bonds backed by risky subprime loans which are now defaulting left, right and centre. Therefore the bond insurers are being forced to make big payouts on their policies and the fact of the matter is, they don’t have enough money to cover all the home loan defaults that will mount up like a rolling snowball during this severe recession.

Please click here to read our article in full.