Two Sets of Ratings Agency Books: Taxpayers Pay For Bond Insurance They Do Not Need February 12, 2008 Pershing Square Capital Management, L.P.

Disclaimer The analyses and conclusions of Pershing Square Capital Management, L.P. ("Pershing") contained in this presentation are based on publicly available information. Pershing recognizes that there may be confidential or otherwise non-public information in the possession of the companies discussed in the presentation that could lead these companies to disagree with Pershing’s conclusions. The analyses provided may include certain statements, assumptions, estimates and projections prepared with respect to, among other things, the historical and anticipated operating performance of the companies. Such statements, assumptions, estimates, and projections reflect various assumptions by Pershing concerning anticipated results that are inherently subject to significant economic, competitive, and other uncertainties and contingencies and have been included solely for illustrative purposes. No representations, express or implied, are made as to the accuracy or completeness of such statements, assumptions, estimates or projections or with respect to any other materials herein. Actual results may vary materially from the estimates and projected results contained herein. Pershing disclaims any obligation to update this presentation. Funds managed by Pershing and its affiliates own investments that are bearish on participants in the financial guaranty business including, but not limited to, MBIA and Ambac. These investments may include, without limitation, credit-default swaps and short sales of common stock. Pershing manages funds that are in the business of trading - buying and selling - securities and credit default swaps. Pershing may change its position regarding the companies and possibly increase, decrease, dispose of, or change the form of its investment in the companies for any or no reason. This presentation should not be considered a recommendation to buy, sell, or hold any investment.

The analyses and conclusions of Pershing Square Capital Management, L.P. ("Pershing") contained in this presentation are based on publicly available information. Pershing recognizes that there may be confidential or otherwise non-public information in the possession of the companies discussed in the presentation that could lead these companies to disagree with Pershing’s conclusions.

The analyses provided may include certain statements, assumptions, estimates and projections prepared with respect to, among other things, the historical and anticipated operating performance of the companies. Such statements, assumptions, estimates, and projections reflect various assumptions by Pershing concerning anticipated results that are inherently subject to significant economic, competitive, and other uncertainties and contingencies and have been included solely for illustrative purposes. No representations, express or implied, are made as to the accuracy or completeness of such statements, assumptions, estimates or projections or with respect to any other materials herein. Actual results may vary materially from the estimates and projected results contained herein. Pershing disclaims any obligation to update this presentation.

Funds managed by Pershing and its affiliates own investments that are bearish on participants in the financial guaranty business including, but not limited to, MBIA and Ambac. These investments may include, without limitation, credit-default swaps and short sales of common stock.

Pershing manages funds that are in the business of trading - buying and selling - securities and credit default swaps. Pershing may change its position regarding the companies and possibly increase, decrease, dispose of, or change the form of its investment in the companies for any or no reason.

This presentation should not be considered a recommendation to buy, sell, or hold any investment.

Municipal Bonds Perform Better Than Corporate Bonds According to historical default rates, Municipal Bonds rated as low as Baa have performed better than Aaa-rated Corporate Bonds. Yet, Moody’s continues to rate Municipal Bonds lower than Corporates, forcing those investors that are required to own AAA-rated securities (or issuers targeting them) to purchase bond insurance Source: Moody’s, The U.S. Municipal Bond Rating Scale March, 2007

According to historical default rates, Municipal Bonds rated as low as Baa have performed better than Aaa-rated Corporate Bonds. Yet, Moody’s continues to rate Municipal Bonds lower than Corporates, forcing those investors that are required to own AAA-rated securities (or issuers targeting them) to purchase bond insurance

Municipal Bonds Deserve Higher Ratings According to Moody’s, many Municipal Bond issues would be rated AAA and would not need bond insurance if they were rated on the same standard as Corporate Bonds Source: Moody’s, The U.S. Municipal Bond Rating Scale March, 2007

According to Moody’s, many Municipal Bond issues would be rated AAA and would not need bond insurance if they were rated on the same standard as Corporate Bonds

Municipal Bonds Deserve Higher Ratings Moody’s will give a lower rating on the tax-exempt bonds (municipal scale) than it will to taxable bonds (corporate scale) despite being sold by the identical municipal issuer Many investors are only permitted to buy Triple-A rated bonds Because tax-exempt municipal bonds are priced on the more stringent municipal scale, an issuer must purchase insurance to achieve the higher taxable municipal bond rating Some institutional investors may be aware of this distinction, but it is doubtful that retail investors are According to reports, retail investors purchase roughly two-thirds of all municipal bonds Bond Insurance might not be necessary if retail investors understood the true underlying ratings of municipal bonds

Moody’s will give a lower rating on the tax-exempt bonds (municipal scale) than it will to taxable bonds (corporate scale) despite being sold by the identical municipal issuer

Many investors are only permitted to buy Triple-A rated bonds

Because tax-exempt municipal bonds are priced on the more stringent municipal scale, an issuer must purchase insurance to achieve the higher taxable municipal bond rating

Some institutional investors may be aware of this distinction, but it is doubtful that retail investors are

According to reports, retail investors purchase roughly two-thirds of all municipal bonds

Bond Insurance might not be necessary if retail investors understood the true underlying ratings of municipal bonds

Taxpayers Have Paid for Bond Insurance They Don’t Need We estimate that states and municipalities have paid over $30B for Bond Insurance in the past that they did not need. This year alone they will pay upwards of an additional $2.3B $ billions

We estimate that states and municipalities have paid over $30B for Bond Insurance in the past that they did not need. This year alone they will pay upwards of an additional $2.3B