MBIA in written testimony for a House Financial Services Committee, Subcommittee on Capital Markets hearing Thursday at 11:30 a.m. EDT named William Ackman, founder and chief executive officer of hedge fund Pershing Square Capital Management LP, as an "activist short seller" working to undermine confidence in the bond insurers. "As has been widely reported in the media, certain parties such as Mr. William Ackman of the hedge fund Pershing Square Capital Management LP, also known as activist short sellers stand to realize significant financial gains from declines in MBIA's stock price and/or increases in the price of credit default swaps they hold that are connected to MBIA," the testimony stated. Ackman and other short sellers' efforts to drive MBIA's stock price downward "have included raising questions about MBIA's capitalization, the losses it will likely sustain, its liquidity position, the legality of operations and the viability of the business model," the testimony added.
Ackman in testimony he plans to give Thursday said, "The poor decisions of (bond insurance) holding company executives are the primary cause for the bond insurers' problems, but rating agencies also share responsibility."
Also, speaking at the Thursday hearing will be Michael McCallen, president and CEO of bond insurer Ambac Financial Group Inc., which had recently rebuffed Warren Buffett's offer to reinsure $800 billion in municipal bonds. Meanwhile, Eric Dinallo, superintendent of the New York State Insurance Department, who received a letter from Buffett outlining his plan to bail out bond insurers MBIA, Ambac and Financial Guaranty Insurance Co., will also take part in the hearing. - Michael Rudnick
