Financial Security Assurance (FSA) was an American financial guaranty (or monoline)
insurance company
Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to protect ...
. FSA was bought in 2000 for EUR€2.7 billion by the Franco-Belgian bank
Dexia
Dexia N.V./S.A., or the Dexia Group, is a Franco-Belgian financial institution formed in 1996. At its peak in 2010, it had about 35,200 members of staff and a core shareholders' equity of €19.2 billion.
In 2008, the bank entered severe ...
. In 2007, before the
2008 financial crisis
The 2008 financial crisis, also known as the global financial crisis (GFC), was a major worldwide financial crisis centered in the United States. The causes of the 2008 crisis included excessive speculation on housing values by both homeowners ...
, FSA was ranked number four among global
monoline credit insurers. In 2009, it was acquired by ''Assured Guaranty Corporation''.
FSA insured primarily
municipal bond
A municipal bond, commonly known as a muni, is a bond issued by state or local governments, or entities they create such as authorities and special districts. In the United States, interest income received by holders of municipal bonds is often ...
s,
asset-backed securities, and
mortgage-backed securities
A mortgage-backed security (MBS) is a type of asset-backed security (an "Financial instrument, instrument") which is secured by a mortgage loan, mortgage or collection of mortgages. The mortgages are aggregated and sold to a group of individuals ( ...
. Before insuring a municipal bond, monolines would request a pledge of local tax revenues or revenues from essential public services such as municipal water charges.
History
The subprime mortgage crisis
On 4 February 2008, Dexia announced that it was investing $500 million (~$ in ) in FSA to "take advantage" of "increasing opportunities that have recently emerged" in the field of financing of US communities and public infrastructure.
On 20 June 2008, the US hedge fund manager
Bill Ackman
William Albert Ackman (born May 11, 1966) is an American billionaire hedge fund manager who is the founder and chief executive officer of Pershing Square Capital Management, a hedge fund management company. His investment approach has made him ...
announced publicly that he bet on an FSA bankruptcy. 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."
FSA posted for the first quarter of 2008 a $421.6 million (~$ in ) 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. 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.
References
{{reflist
External links
Site du rehausseur de credit FSASite de Dexia
Subprime mortgage crisis