In yesterday's online edition of The Wall Street Journal, it was reported that MBIA (NYSE: MBI) is facing lawsuits from a group of 18 different financial institutions. The lawsuit was filed in New York State court and includes the likes of J.P. Morgan Chase (NYSE: JPM), Bank of America (NYSE: BAC), Morgan Stanley (NYSE: MS), and UBS (NYSE: UBS).
These banks are claiming that the way MBIA split its municipal bond insurance business earlier this year was "an unlawful attempt to escape" its contractual obligations to cover losses from mortgage securities. In addition to the split earlier this year, MBIA shifted $5 billion to a municipal bond insurance company.
Many of the banks in the suit purchased credit derivatives from MBIA that insured them against losses on securities that were backed by subprime mortgage assets and commercial real estate loans.
This suit follows another suit filed in April by another group of investors. MBIA contends that the case is without merit and it will "contest it vigorously."
Technically, MBIA has surged a bit in the intermediate term. However, the stock continues to face overhead resistance from its 50-week moving average. This trendline turned the shares away in 2008 and hasn't been breached since October 2007. This news, coupled with the overhead resistance, does not bode well for a stock that is struggling in the $7 region.
This suit follows another suit filed in April by another group of investors. MBIA contends that the case is without merit and it will "contest it vigorously."
Technically, MBIA has surged a bit in the intermediate term. However, the stock continues to face overhead resistance from its 50-week moving average. This trendline turned the shares away in 2008 and hasn't been breached since October 2007. This news, coupled with the overhead resistance, does not bode well for a stock that is struggling in the $7 region.
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