MBIA chief steps down, former CEO returns
Gary Dunton announces resignation amid industry-wide crisis, and former CEO Joseph Brown assumes control.
NEW YORK (CNNMoney.com) -- Bond insurer MBIA Inc. said Tuesday that Chairman and Chief Executive Gary Dunton has resigned and that former CEO Joseph "Jay" Brown was returning to assume the helm of the embattled company.
The Armonk, N.Y.-based company said that Dunton, 52, would be replaced immediately by Brown, 59, who retired from his position of executive chairman at the firm last May.
MBIA (MBI) shares jumped on the news but were little changed in morning trade.
"The board is unanimous in its belief that Jay Brown's deep understanding of MBIA and its challenges make him singularly qualified to lead the company and differentiate MBIA in the current environment," said David Clapp, the lead director of the company's board.
Brown, who became chairman and CEO in January 1999 after serving on the board since 1986, conceded that MBIA faces "meaningful challenges."
Credit rating agencies have threatened to cut the 'AAA' rating of bond insurers like MBIA, fearing that they do not have the ability to pay claims on mortgage-backed securities that turned toxic as a result of the credit crisis. Many fear that ratings downgrades could set off a chain reaction across the broader financial landscape and spark more losses at the nation's largest banks, which have already endured losses of more than $100 billion dollars as a result of the credit crisis.
In a letter to shareholders, Brown said that his focus will be on dealing with the industry-wide crisis and positioning MBIA to continue to sell 'AAA' insurance and pay claims.
"We will do our best!" Brown wrote in his closing remarks.
Tuesday's announcement marks the latest development in the unfolding bond insurance crisis.
Last week, Congress rounded up executives from both MBIA and rival Ambac as well as New York Gov. Eliot Spitzer and New York State Insurance Superintendent Eric Dinallo, in an attempt to find a solution to the unfolding crisis.
That same day, rival Financial Guaranty Insurance Co. got downgraded by Moody's Investors Services and subsequently requested to break up its troubled structured finance arm from its healthy municipal bond insurance business.
That remedy, which would safeguard the insurers' municipal bond customers, seems to attracting more interest.
Ambac was reportedly seeking to raise $2 billion in capital to keep its top-notch credit rating, a move viewed as a precursor to breaking up its business, according to The Wall Street Journal.
Billionaire investor Warren Buffett also offered last week to take over the municipal bond liabilities of the three largest bond insurers - widely believed to be Ambac, MBIA and FGIC.