As Ambac Files For Chapter 11, Fed Is On The Hook With $10MM In Short CDS Exposure

Tyler Durden's picture

Ambac Financial Group has just filed for Chapter 11, using a filing which is so fresh it even forgot to lock the input forms (see attached). The case is 10-15973 in Southern District of New York. The actual filing is not surprising, as we noted earlier that Ambac was likely going to file imminently. What is also not surprising is that the form 1, erroneously, lists assets of between 0 and $50,000 and liabilities of over $1 billion, even as Exhibit A clarifies assets as $394.5 million and liabilities of $1.6824 billion. Obviously someone was in a rush. Keep in mind this is a stock that Cramer was previously pitching to his very few viewers. Ambac's bankruptcy lawyers are Dewey and LeBoeuf, and Blackstone gets the coveted role of financial advisor. None of the relevant unsecured creditors have been disclosed as most are in DTC form, with BNY listed as custodian. Yet one definitive loser in the Ambac bankruptcy is none other than 'our' own New York Fed. As the Maiden Lane I holdings list as of June 30, when the Fed consumed Bear Stearns most toxic 'assets' and gave Jamie Dimon a clean sheet to buy the clean stripped bank for $10/share, it also adopted a bunch of Ambac CDS. And as of June 30, the Fed held $10 million in ABC CDS.

Now that there is a credit event, it will be impossible for the Fed to continue claiming that its rescue portfolios are doing just swimmingly (or so we hope, for BlackRock's sake). Furthermore, the Fed will be forced to payout on the CDS which will likely end up pricing in the settlement auction somewhere very close to zero, implying a near total wipe out on the entire $10 million in short CDS. And lucky Fed: as of March 31, the Fed had actually held a net $50 million in ABC short protection, so in Q2 it covered $40MM worth of short protection. So now all eyes turn to Ambac soulmate MBIA... where the Fed is short $84 million worth of CDS.

Full bankruptcy filing (pdf):


Ambac Chapter 11 Filing -

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NumberNone's picture

When ZH first ran the story on ABK during market hours I watched the stock waiting for the drop but it never came, it actually closed up.  Now after-hours they are getting a 60% drop.  Unbelievable ZH.  

First the Fed report, now this.  No wonder I spend way too much time on this site.

ghostfaceinvestah's picture

I noticed that too, too bad it was impossible to short the stock, there was a good 15 minutes before closing that the pending BK news was out there, but no response in the pps.

Mitchman's picture

During the day, it was Cramer taking a long position.

MarketTruth's picture

While Cramer's 'Long Position' was preparing (minus lubricant) to give it up the kazoo to stockholders.


Congrats ZH, another feather in your cap for calling it right!

sourgrapesson's picture

 I'd say that naysayers of ZH arent even worthy of shining Tylers sneakers.

jbc77's picture

Yeah no kidding. I actually run ZH on tab all day, no matter what PC I'm on. This is all the financial news fit to consume these days.

whatsinaname's picture

You mean the taxpayer is on the hook for any Ambac related losses right ?

rocker's picture

So I ask, what does Blackrock have in this? Do they have equity?  And why the hell does MBIA keep going up? 

Mitchman's picture

Great work, TD

erik's picture

Millions don't really matter do they?

Have all the inter-related tangles of CDS, etc been accounted for in Ambac's case?  Or should we see some banks soon owning up to losses?

New_Meat's picture

I like the cluelessness of not "locking" the form.  OPSEC is just a term for nothing left to loose. - Ned

egdeh orez's picture

pfft... $84 million?

I'll be wiping my ass with that much money in two years time.

Ancona's picture

Sweet!! I get to pay for some more corrupt, criminal bullshit!


I'll never learn.  :(

johngaltfla's picture


Sell some of your gold BITCHEZ to cover that loss you pigs!

Arius's picture

Booyaaa - this is Cramerica...the land of....

TooBearish's picture

The FED lost 84MM!!!! OMG that falls outta Bens back pocket when his pants are on the floor while he gets his weekly ass rape by Larry Summers

High Plains Drifter's picture

assets of 50,000 and liabilities of over a billion. yeh that sounds about right. As I read this, there is Cramerica's face on the left hand side of my screen smiling at me.

Rainman's picture

Obama wipes his ass with 10,000,000 sheets per second. Just a petty cash loss in a world of the grandest larceny.

Problem Is's picture

King of the Ass-Hats
So Cramer the Clown's Pimpin'n'Pumpin Ambac stock could only add $50k to assets...

I guess all those who followed the advice of the King of the Ass-Hats on CNBC have lost so much money:

  1. They were foreclosed on and have no place to watch CNBC...
  2. Had their cable shut off and can't watch CNBC...

Clown Tops in Financial TeeVee Ratings
So Cramer the Clown's viewers are now down to:

  1. Clown...
  2. Coke-Head Kudlow...
  3. Robert The Rube "What Me Worry About Insider Trading at Citi" Rubin...
  4. Client #9 (College pal)...
  5. Fat Larry, Timmay and Bennie (aka Moe, Larry, Curly)...

Time for breast enhancements and a hair piece Clown... Like the other CNBC Anchorettes...

rocker's picture

Years back when they worked together, I called in and called them the Scudlow & Drainer Show . 

Cramer's remark,  " You sure got flair ".    My remark, "Just calling it like I see it".    Next: Dial Tone 

FunkyMonkeyBoy's picture

What's going on with the EUR/USD?

Modus's picture

movements in european sovereigns cds. or more precisely: irish and spanish cds spreads were much wider for today (actually all peripheral sovereign cds were wider) and will presumbly further widen in the future. that puts pressure on eur

shortus cynicus's picture

probably Ireland is going full ahead

Merkel and Scheuble will tomorrow increase export expectations, jobs saved, holidays may begin - just relax, all will be ok, Merkel take care of it.

Vampyroteuthis infernalis's picture

I have more confidence in ZH now since the earliest announcement was accurate. Good job. The big question is this the beginning of the shadow banking meltdown which is way overdue?

sbenard's picture

Is this what caused stock futures to drop to the day session lows this evening? I wouldn't doubt it!

trav7777's picture

$10MM...that's IT?

Chump change...even Mozillo lost more than that.  BB probably can pay that out of his own personal account.

Betty Swallsack's picture

Doesn't 'million' only require one 'M'?

unununium's picture

Do we believe that the rest of the market is now completely insulated from this?  2 years ago, it would have been "lights out."  For example, don't a lot of funds have to sell their muni bonds if their bough-and-paid-for AAA rating disappears?

knukles's picture

It's BlackRock.  Not Blackstone.

Azwethinkweiz's picture

Ambac, Financial Peace of Mind.....LOL


NEW YORK--(BUSINESS WIRE)--Dec. 21, 2000

Ambac Financial Group, Inc. (Ambac) announced today that it has $75.1 million in insured net par exposure outstanding to Southern California Edison.

The bonds are secured by a first mortgage or lien on substantially all of the property and franchises now owned by Southern California Edison. Ambac has $72.6 million in insured net par exposure outstanding to Pacific Gas & Electric. These bonds are also secured by a first mortgage lien. Both Southern California Edison and Pacific Gas & Electric have been warned by Standard & Poor's that their ratings might drop below investment grade.


Will the dominos begin to fall?

Clapham Junction's picture

Thanks man, great post.  Also, check over at Markit CDS section for details on the "event."

ss123's picture

As of the WSJ story tonight on ABK, the IRS is looking at the books. This ain't good.

willien1derland's picture

Simply unworthy Tyler - you & your team lead the way - so now that AMBAC hits the skids & MBIA not far from taking a dive - can anyone comment on what the rating agencies are preparing to do to the hundreds of millions of USD in Municipal Bonds that used their insurance to achieve the ever coveted AAA/Aaa rating? Ohhh the coming wrath of the Blue Hair Ladies - Bennie Boy better saddle up as these women will take NO PRISONERS!

johny2's picture

how long does it take to print 10 million us dollars? 

Panafrican Funktron Robot's picture

For those wanting to do a deep dive.  Hundreds of billions in net par exposure.  The effect on the bond market is kind of hard to say, it depends on what happens during the BK.  As of right now, the CDS regarding AMBAC as a company is a relatively small event, the big issue is going to be what happens to their book.  Obviously anything they've written went from mostly illiquid status to entirely illiquid status, but if a relatively solvent entity absorbs it, this could be a net positive for bonds.