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H. Russell Fraser, ACA Capital’s Cowboy Founder, Dies at 71

ACA Capital Founder Russell Fraser,
H. Russell Fraser, a former Fitch Investors Service executive who founded ACA Capital Holdings Inc., died last week at age 71. Source: ACA Capital Holdings Inc via Bloomberg

H. Russell Fraser, a former chief executive officer at Fitch Ratings who founded bond insurer ACA Capital Holdings Inc. and worked in cowboy boots, hat and jeans, has died. He was 71.

He died on Nov. 21 at home in Littleton, Colorado, according to his wife, Patsy. The cause was emphysema.

Fraser, who was CEO at Ambac Financial Group Inc., a New York-based bond insurer, before moving to Fitch, a credit-rating company, founded ACA in 1997. The firm, which specialized in municipal bonds with lower ratings than larger competitors would guarantee, averted a downgrade in 2001 after firing 40 percent of its employees and receiving $45 million in new funds.

As part of the reorganization, ACA shifted its focus to structured finance and Fraser resigned to oversee a beef jerky plant and pioneer town in Wyoming.

While at New York-based ACA, Fraser was known for his cowboy appearance. He dressed in jeans, a 10-gallon hat, leather vest and “looked like the Marlboro man,” Jennifer Lerch, who worked at ACA, said yesterday in an interview.

Fraser didn’t look out of place on weekends, when he flew home to his cattle ranch in Cody, Wyoming.

When Fraser left ACA over the move to structured finance, he picked up his satchel, which was more saddlebag than briefcase, and “shuffled down the hall in his cowboy boots with a giant squirt gun,” spraying employees on his way out, she said.

Credit Crunch

“That was the way he could put levity in a situation that was really hard for everybody,” said Lerch, now director of business and cooperative programs in rural development at the U.S. Department of Agriculture. “So he went down the hallway and shot everybody with a giant squirt gun and got in the elevator bank and left, and that was the end of it. He never went back in again.”

ACA lost the investment-grade credit rating it needed to guarantee new securities in December 2007 as defaults on home loans to the riskiest borrowers packaged into bonds caused a credit seizure, leading to writedowns and losses of more than $2 trillion at the world’s largest financial institutions.

Harold Russell Fraser was born on April 18, 1941, to Harold and Alma Fraser in Middletown, New York, about 65 miles (105 kilometers) north of New York City. He attended Orange County Community College, a two-year school in Middletown, and then moved to the University of Arizona, where he graduated in finance and economics.

New Borrowers

Fraser went to work as a debt analyst at Standard & Poor’s, and then in fixed-income research at Paine Webber Inc. He was president and CEO of Ambac from 1980 to 1989, before becoming chairman and CEO at Fitch.

While at Fitch, Fraser intensified its rivalry with the larger ratings companies Moody’s Investors Service Inc. and Standard & Poor’s Corp. During his tenure, Fitch’s revenue increased 12-fold, Larry Taylor, president of the Fixed Income Analysts Society Inc., said when Fraser was inducted into the group’s hall of fame in 1998.

Fraser founded ACA to insure a new crop of borrowers he sometimes called “the cream of the crap.” They included issuers such as the American Center for Wine, Food and the Arts in Napa, California, which sold municipal debt through the California Infrastructure & Economic Development bank insured by ACA Financial. Other borrowers included the Cleveland, Texas, schools and Woodbury County Boys and Girls Home and Family Services Inc. in Sioux City, Iowa.

“That was the reason he started ACA, for the underdogs,” Lercher said.

Fraser had “tremendous energy, tremendous enthusiasm for his work,” Patsy Fraser said. When he left finance, he “missed very much the intellectual stimulation of creating things,” she said.

In addition to his wife, Fraser is survived by three children, Suzanne, Chris and Amy.

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