MBIA and Ambac are two monoline insurers who exposed themselves to vast liabilities by insuring trillions of dollars in re-packaged mortgage debt that was then sold on secondary markets.
Problem was ...
A nation of households making $48,201 a year (the national median) could not actually afford to purchase real estate priced at many multiples the historical average. (Um, duh.)
As more mortgages failed, so increased the risk that MBIA and Ambac won't be able to make good on the securities that they insured.
As the critical fact of housing inaffordability reaches back to bite MBIA and Ambac on the arse, another consequence is being realized:
Municipalities, hospital and transport authorities, school districts and other bodies that serve the public good are finding it more and more difficult -- and more and more expensive -- to raise the money that they need to provide vital services to communities.
More from the article linked above:
Losses suffered by bond insurers on securities tied to U.S. home loans have cascaded through financial markets to hurt local governments whose budgets are already being squeezed by the slowest pace of economic growth in five years.
"Why are you punished for having insurance, even if the insurance is no good?" said Randall Walker, the director of Nevada's Clark County Department of Aviation, which oversees McCarran International Airport in Las Vegas. "It doesn't make much sense, but that's the market."
...
The rate on $240 million of the airport's bonds jumped to 9 percent on June 25, more than three times the 2.5 percent rate on June 4, threatening to saddle McCarran with $12 million in additional annual costs.
Well, it totally does make sense.
The crimes of the few are being visited on the many. Investment banks, hedge funds and (some) housing speculators made away with millions or billions during the housing boom. The housing boom was only made possible by relaxed lending standards and de-regulation imposed on the markets by the Bush Administration, and by cheap money supplied by the policies of Alan Greenspan.
Hospitals, schools and transportation authorities will have to give up some projects, but where day-to-day costs are concerned, as well as critical repair, well ...
The taxpayer will be asked to cough up the difference, to be sure.
Problem is, taxpayers don't have it. We're bankrupt. We can barely pay our bills.
Goldman, Sachs paid its employees $20 billion last year in bonuses.
Where'd all that money come from?
It came, in part, out of the budget for Sarasota community hospitals.
