Activist Renews MBIA Fight

For bond insurer MBIA(MBI), it may be looking like 2002 all over again.

Five years ago, hard-driving activist hedge fund manager Bill Ackman of Pershing Square Capital questioned the credibility of monoline insurance companies, penning a scathing and lengthy report on MBIA. He argued that the credit insurance company didn't deserve its triple-A rating.

Ackman on Wednesday renewed the long-running hostilities at the third annual Value Investing Congress, at the Time Warner Center in New York, saying that the firm was headed for financial ruin by as early as the second half of next year, and that some of its practices should raise eyebrows among regulators.

"The company strongly disagrees with Mr. Ackman's statement that the company will be insolvent in the second quarter of 2008," Jeff Lloyd, an external public relations official, tells TheStreet.com on behalf of MBIA. "He made similar statements in 2002, none of which have come true."

Ackman, who has a significant short position in MBIA and Ambac(ABK), spotlighted MBIA, alleging that it also may have engaged in unsavory transactions by making speculative derivative transactions and by borrowing funds indirectly from reinsurance subsidiaries. The spokesman declined to comment, saying that MBIA had not had time to fully review Ackman's accusation about its investment practices.

Whether Ackman's accusations turn out to be true may be moot if the monoline businesses run aground due to the deteriorating conditions in credit.