Financial Security Assurance

Financial Security Assurance (FSA) is a financial guaranty (or monoline) insurance company. In 2007, before the 2008 financial crisis, FSA was ranked number four among global monoline credit insurers.[1]

FSA insured primarily municipal bonds, asset-backed securities , and mortgage-backed securities. Before insuring a municipal bond, monolines request a pledge of local tax revenues or revenues from essential public services such as municipal water charges. FSA was bought on 4 March 2000 for EUR€2.7 billion by the Franco-Belgian bank Dexia.[2]

The subprime mortgage crisis

On 4 February 2008, Dexia announced that it was investing $500 million (~$627 million in 2021) in FSA to "take advantage" of "increasing opportunities that have recently emerged" in the field of financing of US communities and public infrastructure.[3]

On 20 June 2008, the US hedge fund manager Bill Ackman announced publicly that he bet on an FSA bankruptcy.[4] Four days later, on 24 June 2008, Dexia provided FSA with a credit line of 5 billion euros with an initial term of 5 years but renewable "as needed."[5]

FSA posted for the first quarter of 2008 a $421.6 million (~$529 million in 2021) net loss. This was due to impairment losses recorded on credit default swaps and losses on its portfolio of US mortgage bonds.

On 21 July 2008, Moody's placed FSA's Aaa credit rating on review for possible downgrade.[6] On 7 August 2008, Dexia announced that FSA would exit the activity of ABS and devote its resources to public sector finance.

On 1 July 2009, the FSA group, excluding its structured finance liabilities, was sold to Assured Guaranty Corporation. Assured Guaranty changed FSA's name to Assured Guaranty Municipal Corp. in July 2009.[7]

References
  1. Pellecuer, David (29 September 2008). "Dexia, nouvelle victime de la crise bancaire". Le Figaro.
  2. "Dexia ache FSA (Press Release)". edubourse.com. 14 March 2000.
  3. "Le Figaro Bourse". lefigaro.fr. Archived from the original on 2008-10-03. Retrieved 2015-11-10.
  4. Benner, Katie (June 18, 2008). "Ackman has FSA in his sights". Fortune Magazine.
  5. Boksenbaum, Alexandre (24 June 2008). "Dexia croise le fer avec les hedge funds sur FSA (Dexia duels with hedge funds over FSA)". agefi.fr. Archived from the original on 29 June 2008.
  6. "Moody's downgrades FSA to Aa3 from Aaa, with developing outlook". Moody's Investors Service.
  7. "Bloomberg snapshot on Assured Guaranty". Retrieved 19 February 2015.
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