HOBOKEN, N.J.--(BUSINESS WIRE)--In Confidence Game: How A Hedge Fund Manager Called Wall Street’s Bluff (Wiley; April 2010; $27.95; 978-0-470-64827-8; Hardcover), Bloomberg News reporter Christine Richard tells the story of how Bill Ackman tried to warn the powers that be that MBIA and the $2.5 trillion bond insurance business was a catastrophe waiting to happen.
Written with the full support of and access to Bill Ackman, the book opens when the hedge fund manager issued a research report titled Is MBIA Triple-A? in late 2002. This is an opening shot in what became a long and bitter Wall Street feud between him and MBIA. Soon after, Ackman was branded a fraud in the media and was investigated by Eliot Spitzer and the SEC. However, the investigations ultimately led nowhere and Bill Ackman turned the tables years later when MBIA crumbled and his short position made his investors more than $1 billion.
MBIA, one of the five biggest financial institutions in the country in terms of outstanding credit exposure, Moody’s Investors Service, Standard & Poor’s and Fitch Ratings all assigned MBIA’s bond-insurance unit AAA or Aaa ratings. The rating companies had determined that the firm could weather another Great Depression and still meet all of its claims. Bill Ackman wasn’t convinced. MBIA held just $1 of capital for every $140 of debt it guaranteed. The high leverage meant MBIA had virtually no margin of safety.
Given unprecedented access to one of Wall Street’s most famous investors, Richard narrates a compelling, behind-the-scenes human drama that explores many crucial issues, including the market’s unquestioning acceptance of credit ratings, their dangerous reliance on financial models, and the use of securitization to create value from thin air and assumptions.
Confidence Game is a real-world "Emperor's New Clothes," a tale of widespread delusion and one dissenting voice in the era leading up to the worst financial disaster since the Great Depression.
Christine Richard is a reporter with Bloomberg News whose work has been recognized by The New York Press Club and The Newswomen’s Club of New York. She has covered financial markets for 17 years from Washington, Hong Kong, Singapore, and New York.
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