Banks sue MBIA over restructuring


A group of 18 large banks, including JPMorgan Chase (JPM), Bank of America (BAC), Morgan Stanley (MS) and UBS (UBS) among others, is suing MBIA (MBI). The suit, filed in New York, claims the bond insurer illegally split its business, leaving one unit effectively insolvent.

Why do the banks care about MBIA's restructuring? Well, many of them had bought credit derivatives from MBIA that insured them against losses on securities backed by subprime mortgage assets and commercial real-estate loans. Apparently, the banks have paid premiums for the guaranteed insurance protection.