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January 13, 2008

We All Should Have Known These Were Coming...
by Reggie Middleton

Bernstein Litowitz Berger & Grossmann LLP Announces Filing of Class Action Suit Against MBIA, Inc. and Certain of Its Senior Officers and Directors: The Complaint alleges that during the Class Period, MBIA and the individual defendants, Chief Executive Officer Gary C. Dunton and Chief Financial Officer C. Edward Chaplin, violated the federal securities laws by issuing false and misleading press releases, financial statements, filings with the SEC and statements during investor conference calls. The Complaint alleges that, throughout the Class Period, Defendants misrepresented and/or failed to disclose the true extent of MBIA's exposure to losses stemming from MBIA's insurance of residential mortgage-backed securities ("RMBS"), including in particular its exposure to so-called "CDO-squared" securities that are backed by RMBS. This highly risky exposure was belatedly disclosed in a series of public statements beginning on December 19, 2007 and ending on January 9, 2008, the last day of the Class Period. One analyst observed that MBIA had withheld from the public the riskiest parts of its insured portfolio, while others expressed similar dismay at MBIA's failure to apprise investors of these risks in a timely manner. But the readers of the BoomBustBlog.com knew this way ahead or time, or at least I hope they did.

Keller Rohrback L.L.P. Announces ERISA Investigation of the MBIA Inc. 401(k) Plan: Keller Rohrback's investigation involves concerns that MBIA and other administrators of the Plan may have breached their ERISA-mandated fiduciary duties of loyalty and prudence to participants and beneficiaries of the Plan. A breach may have occurred if the fiduciaries failed to manage the assets of the Plan prudently and loyally by investing the assets in Company stock when it was no longer a prudent investment for participants' retirement savings. These shysters obviously failed to read Moody's reports. Don't they know that MBIA has AA rated debt and AAA rated claims paying capabilities. Thier new debt even pays 14%, just like junk bonds!

Statman, Harris & Eyrich, LLC Announces Investigation On behalf of Participants and Beneficiaries of the MBIA Inc. 401(k) Plan: The class action Cincinnati law firm of Statman, Harris & Eyrich, LLC announces it is investigating MBIA Inc. (NYSE:MBI) ("MBIA" or "Company") for potential violations of the Employee Retirement Income Security Act of 1974 ("ERISA") relating to the MBIA Inc. 401(k) Plan (the "Plan"). These shysters obviously failed to read Moody's reports as well. I guess us bloggers aren't the only ones left off of the Moody's AA cum junk mailing lists.

In particular, this investigation focuses on whether Plan fiduciaries breached their fiduciary duties by failing to prudently manage the Plan's assets by, inter alia: (a) offering MBIA stock as a Plan investment option and requiring participants to invest in the stock, (b) permitting the Plan to be invested in MBIA stock when it was imprudent to do so, and (c) encouraging investment in the Company stock in the plan by withholding or concealing material business or financial results information from the Plan's participants and beneficiaries.

Fitch Places 1 class of Nelnet Education Loan Funding, Inc. on Rating Watch Negative: Fitch Ratings-New York-07 January 2008: Fitch Ratings places 1 class of Nelnet Education Loan Funding, Inc. student loan interest margin securities on Rating Watch Negative. This action follows Fitch's placement of MBIA and its financial guaranty insurance subsidiaries Insurer Financial Strength (IFS) rating of 'AAA' on Rating Watch Negative. For more information please refer to 'Fitch Places MBIA on Rating Watch Negative on CDO & RMBS Review', dated Dec. 20, 2007, available on the Fitch Ratings web site at 'www.fitchratings.com'. The ratings of the following ABS transactions are supported by a financial guaranty policy provided by MBIA Insurance Corp., which is a subsidiary of MBIA, and therefore are placed on Rating Watch Negative. Nelnet Education Loan Funding, Inc. (fks NEBHELP) - 1998 Trust (SLIMS) --class SLIMS at 'AAA'

As I have said in the past, Fitch is getting more aggressive than the other two big agencies. I expect to see more of this as the losses pile on to the point where avoidance of a downgrade becomes a public relations nightmare. As it is now, I am sure the more shaky clients of ABK and MBIA are quaking in their boots - particularly after what happened with ACA.

Reggie Middleton
http://boombustblog.com/

Reggie Middleton is the personification of the freethinking maverick--the penultimate nonconformist as it applies to macro strategies, investment, and analysis. He uses his background and knowledge in new media, distributed computing, risk management, insurance, financial engineering, real estate, corporate valuation, and financial analysis to pursue, analyze, and capitalize on global macroeconomic opportunities.

Finding most available research lacking, both in quality and quantity, Mr. Middleton assembled his own talented research staff. As forensic research is a lynchpin for his own investing, "to actually put food on the table," he stands behind it as doing what it is supposed to do - illustrate, elucidate and educate.

He does not sell advice or research. He is an entrepreneur who exists outside of mainstream corporate America and Wall Street. This allows him the freedom to do things that many cannot--perform without conflicts of interest and corporate politics. He prides himself on developing some of the highest quality, actionable research available - regardless of price. He welcomes any and all to peruse his blog of freely available analysis, opinion and participatory social media; use his custom tools, download files, interact with the community and make critical comparisons from a results orientated perspective. Reggie believes ideas and implementations are improved and fine-tuned when bounced off of the collective intellect of the many, in lieu of that of the few - in essence, a form of collaborative open source financial analysis.

Visit his blog Boom Bust Blog.

Copyright © 2007-2008 Reggie Middleton

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