THE Dow soared 200 points in a Christmas rush on Friday that belied emerging details that US banking, mortgage companies and credit rating faced collapse while the nation’s mortgage insurance industry plunged into chaos. There has been a major falling out between mortgage insurers, credit rating companies, banks and mortgage institutions, which believed their loans were insured, only to be stunned to find themselves booted into the mire that is American banking. Perhaps most alarming is the credit standing of the major insurers of mortgage loans as Moody’s, Standard & Poor’s and Fitch Ratings slashed insurer ratings and placed the largest insurer under negative credit watch. The mortgage insurers, especially the giant MBIA, stand accused of further imperilling banks and mortgage companies by spending billions on risky CDOs (collateralised debt obligations) and even riskier “double” CDOs. Not to JPMorgan or Merrill, but to the insurers, which evidently didn’t hear, didn’t realise or didn’t think it worth passing on to the major mortgage institutions that their insurance money was tied up in the same risky ventures these companies were trying to protect themselves from. read more