The Impossible, the Improbable, the completely Unbelievable

http://www.marketwatch.com/news/story/moodys-second-lien-rmbs-woes/story.aspx?guid=%7BC91EE257%2DB2BE%2D43AE%2DB677%2DDC8AE7916A48%7D&dist=hplatest

Poor performance of second lien residential mortgage-backed securities (RMBS) could impact the credit ratings of bond insurers, Moody's Investors Service said on Tuesday. Bond insurers have significant exposure to second lien RMBS, mainly through guaranties on the securities and, to a lesser extent, through exposure to collateralized debt obligations backed by such assets, the rating agency noted.

I can't believe Moody's would even be hinting at such a thing. Could they actually downgrade them? Is that even a possibility? I am in awe. XLF lost almost a 1% on the news and ABK and MBIA both dropped over 5%. This is probably just a warning shot across the bow forcing both companies to start working on raising more capital. A downgrade does create a liquidity situation that Mr. Brown has been bragging about that doesn't exist.