This is not going to end well for the landlords, though the Journal notes that it instills “discipline” into the market when borrowers have their own homes and yachts at stake.

A Catch-22 for insurance regulators

The NYT reports on C1 that bond insurer MBIA’s credit-default swaps (contracts that insure against a security’s default) have their regulator in a Catch-22.

The commissioner of the New York State insurance department wants MBIA to shore up its bond-insurance unit with $900 million it has raised and promised to use for that purpose. The Times says stipulations in the swaps contracts provide for their holders to get paid immediately if something happens to the bond-insurance unit. That gives it leverage over the insurance regulator, the paper says.

The NYT nicely catches MBIA lying about the swaps clause in a conference call.

The swaps’ acceleration clauses appear to be a factor in this bit of brinksmanship, although MBIA does not advertise their existence. In a presentation about its first-quarter results, for example, MBIA said its “insurance contracts are not subject to acceleration.”

Asked about this discrepancy, MBIA said the presentation language meant that holders of its swaps have no acceleration rights “as long as the company continues to operate in its current manner,” which it believes it will do.

“Fortunately, for us it’s not something that we have to be concerned about,” said Greg Diamond, director of investor relations for the company.

Right.

States not playing games with toys

The Journal reports on A3 that states are cracking down on the toy industry with safety regulations that are tougher than the federal government’s.

After delays in Congress and continued weak federal oversight, 16 states have devised laws that are in some cases stricter than what Congress envisions. A proposal in Washington state would curb allowable levels of lead in toys and other products to at most 90 parts per million compared with the 100 parts per million proposed by the House and Senate bills. Industry lobbyists said the competing rules will confuse consumers, make compliance difficult and encourage multiple actions against businesses.

The statehouse moves came after a rash of recalls of toys, especially those made in China, last year. The Journal writes that compliance will be tougher for smaller manufacturers.

Sticking it to the poor students

The NYT’s article on lenders cutting back student loans to two-year colleges and “less selective” four-year schools is having an impact already, the paper reports on C1.

Two Democratic senators introduced legislation that would ban the practice, but some say it will just push more lenders out of the business.

Here’s the You’re Telling Me! Quote of the Day:

“Banks are not philanthropic agencies,” said Pat Watkins, director of financial aid at Eckerd College in St. Petersburg, Fla. The institution was recently informed by Wells Fargo that the bank would not extend loans to its students anymore, Dr. Watkins said.

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