June 23, 2008

So far, banks and brokerages have announced the dismissals of more than 83,000 employees. And more Wall Street layoffs are expected to come in the next few months.

Taking advantage - Fortress Investment Group is considering adding another $1 billion to the war chest it has amassed to take advantage of the pain being felt on Wall Street, The New York Post reported.

Now that LinkedIn has gotten a $1 billion valuation, what of other social-networking sites? DealBook spoke with the chief executive of Doostang, a site aimed at connecting its members with Wall Street jobs, for his take on the social-networking future.Kaltura, a video company that is considered a blend of YouTube and Wikipedia, has closed a second round of funding.

Hedge fund launches slowed to their lowest level in eight years in the first quarter of the year as start-ups were stymied by investors chastened by the credit crunch, and as the shakeout from the worst quarter for hedge funds continues. More single-manager funds liquidated than launched during the first quarter of 2008 and the net total for new hedge funds was 77, according to Hedge Fund Research, a hedge fund industry data provider.

The real issue will become the downgrade of MBIA and AMBAC. Following a series of downgrades from ratings agencies, bond insurers are in talks with banks, looking to wipe away some $125 billion of insurance on debt securities, the Financial Times reported today. Insurers, including New York-based Financial Guaranty Insurance Co., Ambac Assurance Corp. of New York and MBIA Inc. of Armonk, N.Y., gave the banks insurance contracts in the form of credit default swaps. These swaps insured payments on collateralized debt obligations, which were normally backed by subprime mortgages.

Should the banks erase the insurance coverage (also known as “commuting” a contract), they will nix the contract in return for a payment from the insurers.
Those mortgages have plummeted in value in the past couple of years, following numerous defaults and foreclosures.

The value of the contracts is now up in the air but is estimated to be about $125 billion, according to Standard and Poor’s of New York.

Financial services firms, including Citigroup Inc. and Merrill Lynch & Co. Inc., both of New York, have taken write-downs on their quarterly financials due to the deteriorating value of the mortgage-backed securities.