MBIA to urge curtailing short sellers

By Dan Wilchins

NEW YORK (Reuters) - MBIA Inc plans on Thursday to urge lawmakers to curb the short-sellers beating down its stock, and to push rating agencies to revamp how they assess bond insurers.

In written testimony for a subcommittee of the U.S. House Committee on Financial Services, MBIA said lawmakers should help restore confidence in the bond insurers, because their failure could have far-reaching effects on the U.S. and global economies. Reuters obtained a copy of the testimony, which is for a hearing on Thursday.

Short sellers like Bill Ackman, founder of hedge fund Pershing Square Capital Management, have worked hard to undermine market confidence in the bond insurers, wrote MBIA, whose shares have fallen more than 80 percent since the start of 2007.

It isn't the first time tensions between short sellers and the companies they target have escalated into public feuds. Online retailer Overstock.com has sued research firm Gradient Analytics and hedge fund Rocker Partners for allegedly joining forces to drive down its share price.

MBIA wrote that the House Subcommittee on Capital Markets should work with the Securities and Exchange Commission to "curtail (short sellers') unscrupulous and dangerous market manipulation activities."

Bond insurers are expected to make big payouts after insuring repackaged subprime mortgage and other risky debt. Those expected losses are eating into MBIA's capital.

The three major U.S. credit rating agencies are deciding whether MBIA has enough funds available to pay off expected obligations.

If MBIA doesn't have enough capital, it may be stripped of its top debt ratings. The world's largest bond insurer said it expects to find out within four weeks whether it will retain the "triple-A" ratings crucial for winning new business.