Ambac Chairman and CEO Michael Callen is looking for a cue from the feds as the industry recovers.
Ross has been coy about whether he will step in and invest in Ambac or other bond insurers.
Ambac has become a poster-child for the bond insurance industry and the broader subprime meltdown.
JPMorgan claims Ambac knew about the subprime investments the whole time and never objected until they blew up.
Standard and Poor's affirmed the financial strength of MBIA and Ambac shortly before the market closed on Monday.
In spite of this, municipal bond insurers such as Ambac Financial (ABK) and MBIA (MBI) are somehow still solvent.
Fitch Ratings, which affirmed MBIA's triple-A rating on Wednesday, is still reviewing Ambac.
Shares of Ambac swooned 60% in trading Thursday, and rival MBIA fell 40%.
Shares of Ambac fell more than 14% in afternoon trading after being halted on the New York Stock Exchange pending the news.
The two biggest companies in the bond insurance business are MBIA (30, MBI) and Ambac Financial Group (22, ABK) .
Tuesday's rise appeared to stem from Ambac's comments that it is evaluating its strategic alternatives with a number of potential parties.
That interpretation didn't sit well with the bank or with Ambac Financial Group, which had written insurance on BNP Paribas' notes.
While MBIA was removed from credit watch, Ambac was not and will continue to be carefully monitored for a possible downgrade.
Fitch Ratings cut FGIC's financial strength rating Wednesday to double-A from triple-A, and it did the same to Ambac earlier this month.
Patterson Belknap represents monoline mortgage insurers Ambac, Syncora and Assured Guaranty in their pursuit of Bear Stearns and now JPM.
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Wilbur L. Ross Jr. is considering a bid for Ambac Financial Group.
Ambac, meanwhile, canceled plans to raise capital and is talking to banks.
In a 2006 marketing paper Diana Adams, an Ambac managing director, gushed that Ambac's XXX guarantees were giving life insurance companies regulatory relief.
In the case of Ambac, it may make more sense not to wait until the company's situation is quite as dire as Chapter 11.
Assured Guaranty, and the other big monolines like MBIA and Ambac Financial Group, use credit default swaps and other credit derivatives to insure bonds.
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"Ambac's ability to raise sufficient capital to avoid a downgrade is now in significant doubt, " said CreditSights analyst Rob Haines in a research note Thursday.
On Friday Ambac saw its crucial financial strength rating cut to "AA" from "AAA" and the bond insurer's plight is likely to have far-flung effects.
Ambac, FGIC and other big muni-bond insurers have weakened considerably.
In recent years, Ambac, MBIA and others have ventured into insuring credit derivatives and other relatively newfangled fixed-income products invented by and peddled by Wall Street.
Evercore Asset Management, whose clients own about 700, 000 shares of Ambac, sent a letter to the company Thursday saying the capital-raising plan was not fiscally responsible.
Although Moody's maintains its triple-A on Ambac for now, when ratings are split among the credit-review agencies, the market usually treats the lower one as the more important.
In July the CDO's trustee, a Bank of America unit, threw up its hands and filed suit in Manhattan federal court against XL Capital, BNP Paribas and Ambac.
Of course Ackman is also short in his holdings of MBIA, Ambac Financial and other bond insurers, meaning he makes profits when the shares of the companies decline.
Standard and Poor's affirmed the financial strength of MBIA (nyse: MBE - news - people ) and Ambac shortly before the market closed on Monday.
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