Right around noon there was a huge high-volume sell off in Lehman.  In addition several other financials - including Fannie, Freddie and Wachovia - got shellacked.

Why?

Look at MTG.  Down 20%.  AGO in the tank, etc.

Mortgage insurers.  Shortly followed by bond insurers?

This is bad folks.  Really bad.  As in "you'll be fisted so hard that your tonsils will get grabbed from underneath" bad.

Unfortunately its also what I have been predicting for quite some time - a year or so - in this regard, going back to when the Radian deal was originally announced.

MBIA said it has enough assets it can sell to meet its collateral posting requirements:

"``MBIA is not in a `tenuous situation','' Chief Financial Officer C. Edward Chaplin said today in a statement."

This time.  The problem is that this is unlikely to be a one-time event, as I've pointed out.  Selling assets dilutes your capital ratios which means you are subject to getting hit with another downgrade, which requires more postings.  This spiral, once it starts, is very difficult to get under control.

Their claim is somewhat akin to the guy who falls out of an airplane minus a chute and on the way down he remarks that its really not bad at all - in fact, the breeze is refreshing and he needed to dry his hair anyway - it rained on him while he was getting in the plane.

Of course he's not talking about the last 1/8"....