The Unusual Suspects

It's like something out of a movie: a bunch of misfits with nothing much in common are thrown together in an attempt to pull off a massive heist - or acquisition of a monoline insurance company, at least.

According to CNBC, a consortium of banks including RBS, Wachovia, Barclays, UBS, Societe Generale (!), BNP Paribas, Dresdner, and Citigroup is putting together a bailout bid for Ambac.

Just the nationalities involved are mind-boggling: Scotland, US, England, Switzerland, France, Germany. And while some of the banks are large commercial banks with enormous balance sheets, others are much leaner and much more capital constrained. One has to ask what on earth Citi is doing on the list, given the size of Ambac's contingent liabilities: it should be shoring up its capital base right now, not acquiring a potential black hole.

All of the banks are big lenders: there are no pure investment banks on the list, although CNBC reports that the whole scheme is the brainchild of Greenhill & Co. The group of lenders wouldn't look at all peculiar if they were underwriting a big syndicated-loan deal, but this isn't debt, this is equity: it smells much more like the bailout of LTCM, which only came about after the New York Fed banged a lot of heads together.

Who's playing the heavy in this situation? Surely not New York State's Eric Dinallo, he doesn't have that kind of moral suasion. Could enlightened self-interest really be enough to bring all these banks together? Or is there some other shadowy force which managed to get representatives from all these different banks in the same room at the same time?

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