MBIA, the municipal bond insurer, looks cheap at 11x earnings and 1.4 x book value, but when you look at the balance sheet, which very few people look at today, you see that it’s levered 94 to 1. The statutory capital that they keep on hand is 3.5 basis points of their bond guarantees. Compare that to Citigroup, which has almost 9.5 basis points of reserves. Ten years ago just 14% of MBIA’s business came from structured finance guarantees on asset backed securities. Today that number is 32%. Of course the structured finance world is all based on numerous assumptions, including stable interest rates and low default rates. We would say that those are very generous assumptions.
~ "Value Traps Revisited," Dollarcollapse.com, December 21, 2007