MBIA’s (MBI) corporate slogan "Wisdom In Action" presents a monumental irony. Management’s gamble that derivatives were a good way to pop earnings nearly ruined the company. The firm was, after all, supposed to be the safest business in town, insuring municipal bonds meant to do things like build schools.
The people who run MBIA have decided to blame the misdeeds on their watch on someone else, a handy tool employed by executives everywhere.
Hedge fund manager Bill Ackman has seen MBIA for what it was, an insurance operator that took on too much risk. He has been short the stock for some time, and vocal about how badly MBIA has been run. Now the company is talking about suing Ackman as a means of punishing him for his opinions and his intelligent observation that MBIA shares would fall.
According to The New York Post, MBIA is "assessing all our options, including litigation" against Ackman’s Pershing Square Capital Management LP, Chief Executive Officer Jay Brown said on a conference call yesterday.
Short sellers are often viewed as the most wicked people in the financial community, building their businesses on rumors and unnecessarily negative characterizations of the prospects of the companies they short. If that is true, Ackman’s campaign against MBIA is novel because its premise has been true.
Douglas A. McIntyre
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