Wednesday, October 22, 2008 0 comments ++[ CLICK TO COMMENT ]++

Ambac CEO Replaced

This is probably bad news, with earnings almost around the corner (likely in first week of November,) but Ambac replaced its CEO. This is never a good sign and remains to be seen if there are any negative surprises when they release earnings. However, it should be noted that Michael Callen only took over the job as an interim CEO so it isn't as surprising as it may seem.

The CEO position is being taken up by the Chief Risk Officer, David Wallis. There is good and bad in this. I have been dissapointed with the risk control at Ambac over and I recall David Wallis saying that the situation was under control back in late 2007. Yet the whole thing fell apart later on. That's the bad aspect to this. The good news, if any, is the fact that he will be intimately familiar with the insured risk. Going with someone outside the firm who is not familiar with any of these complex securities would have been risky. Recall how AIG hired an executive from outside the firm and it completely collapsed due to (easily understood) collateral requirement. Clearly the new CEO didn't understand the complexity of the insured securities.

The total disintegration of the bond insurers is not necessarily a surprise given what has transpired in the world. I remember someone saying that if the credit market blows up, the monolines would be toast but they were the last worry in such a situation. Well, it looks like a huge chunk of the financial world has indeed blown up. If someone had told me that Ambac would be lingering on while Bear Stearns, Lehman Brothers, and AIG would collapse, I wouldn't have believed it.


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