MBIA has been one of the casualties of the market downturn, and now a fund firm is taking the bond insurer to task for its reaction to it all. The Wall Street Journal's Serena Ng reports that Third Avenue Management just filed suit against MBIA in Delaware, arguing that the splitting of MBIA was tantamount to "asset stripping" from its investors. (Several Third Avenue funds, including the Third Avenue Value Fund, hold about $400 million in surplus notes from MBIA Insurance.) Third Avenue wants MBIA's split to be undone.

MBIA CEO Jay Brown responded by arguing that the break-up of MBIA "should not have been a surprise."

We appreciate Third Avenue's past support of MBIA and regret that they felt today's action was necessary," stated Brown.

But Third Avenue Funds chairman Martin Whitman retorted that he was "blind-sided" by MBIA's "utterly outrageous" decision to split up.

"This is a big disappointment to us, especially after we went to bat for them with our pocketbooks," Whitman told the WSJ. 

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