1. Credit Enhancement: A Clash of Cultures Robert D. Aicher Kenneth R. Wylie © Sidley Austin Brown & Wood LLP 2002

3. “Gentlemen, [said the banker, M. Danglars] … a most ridiculous circumstance has occurred … Thomas and French, the bankers at Rome, have sent to me a certain individual calling himself the Count of Monte Cristo who is desirous of opening an account with me to any amount he pleases …” (Alexandre Dumas, The Count of Monte Cristo, page 469, Collins (London and Glasgow) 1884, (latest reprint 1968) (originally published in France in 1844).

4. “See here … [ says the Count] are two similar letters to that you yourself received; the one from the house of Arstein and Eskeles of Vienna to Baron de Rothschild, the other drawn from Baring of London to M. Laffitle. Now sir, you have but to say the word and I will spare you all uneasiness and alarm on the subject, by presenting my Letter of Credit at one or the other of the establishments I have named.” (Alexandre Dumas, The Count of Monte Cristo, page 473, Collins (London and Glasgow) 1884, (latest reprint 1968) (originally published in France in 1844).

6. Letters of Credit Bank Letter of Credit Beneficiary Underlying Transaction Customer Reimbursement Agreement

7. Financial Guarantee Insurance Policy Insurer Financial Guaranty Insurance Policy Beneficiary Insurance and Indemnity Agreement (optional) Issuer/Counterparty Underlying Transaction ( typically Municipal Bonds, Debt or Derivative Transactions )

9. Traditional Insurance (Bilateral) Policy InsuredInsurer Premiums

10. Traditional Defenses to Payment Fraud (including fraudulent misrepresentation, fraud in the inducement, and fraudulent non-disclosure) Misrepresentations (innocent and negligent) Breach of conditions in policy(and breach of proof of loss warranty) Inadequate notice Loss caused by or due to the fault of the insured Loss not within coverage of risk assumed Policy not in effect because not issued/expired/cancelled No insurable interest Excessive claim

11. Surety Bond Surety Surety Bond Obligee Reimbursement Agreement Obligor Underlying Transaction (typically a Construction Contract)

12. Commonalties Bank/Insurer/Surety - Letter of Credit - Financial Guarantee Insurance Policy - Surety Bond - Beneficiary - Obligee -Reimbursement Agreement - Insurance and Indemnity Agreement -Customer -Issuer/Counterparty -Obligor Underlying Transaction

14. Hollywood Funding Movie Companies Flashpoint Institutional Investors HIH, Insurer 1-3 Reinsurers AIG, Insurer 4-6 Hollywood Funding Nos. 1-6

16. Forward Sale Contracts (of future oil and gas deliveries) Chase Mahonia Limited 11 Sureties $ Prepay price of oil and gas ENRON North America Insure payment of loan if default in deliveries Mahonia Loan

17. ENRON CORP. Same Director and Shareholders Sell same quantities of gas on same dates as per Mahonia forward contracts Buy Gas/Oil over future dates Guaranty of delivery obligations to Mahonia Forward Sale Contracts (of future oil and gas deliveries) Stoneville Aegean Limited Mahonia Limited 11 Sureties Chase $ Prepay price of oil and gas ENRON North America Insure payment of loan f default in deliveries Loan $$ $

18. Credit Enhancement: A Clash of Cultures Robert D. Aicher Kenneth R. Wylie © Sidley Austin Brown & Wood LLP 2002

19. Table 1 Insurers With Financial Enhancement Ratings

21. Credit Enhancement: A Clash of Cultures Robert D. Aicher Kenneth R. Wylie © Sidley Austin Brown & Wood LLP 2002