MBIA brings back ex-CEO, looks at split

Bond insurance giant MBIA Inc. said Tuesday that it brought back its former chief executive and that it might separate its municipal bond business to protect that unit from losses the company was facing on mortgage-backed bonds.

But Wall Street didn’t seem impressed: MBIA shares slid 54 cents, or 4.4%, to $11.70.

MBIA said Joseph “Jay” Brown returned as chairman and chief executive of MBIA after the ouster of former CEO Gary Dunton on Saturday.

Brown, 59, was CEO until 2004, when Dunton took over.

Bond insurers are reeling from the cost of guaranteeing mortgage bonds as home loan defaults surge. The companies have scrambled to raise capital to maintain their AAA credit ratings, which are key to their lucrative municipal-bond-guarantee business.

The idea of splitting the companies has gained traction over the last week.

FGIC Corp. sought permission from regulators to split up last week. Ambac Financial Group Inc. also reportedly is considering such a move.

Now, “It looks like MBIA has joined the crowd in at least looking at a split,” said Donald Light, an insurance analyst at consulting firm Celent.

In an interview Tuesday, Brown said, “The marketplace is saying it doesn’t work well to have two stores selling these products under one roof.” But he indicated that a split could take time.

New York regulators are trying to orchestrate a plan to keep bond insurers afloat. New York Gov. Eliot Spitzer, who last week told reporters that a plan might be worked out in a matter of days, said Tuesday through a spokeswoman that he was “less interested in a specific timetable than we are about achieving a beneficial private-sector solution.”