Ross has been coy about whether he will step in and invest in Ambac or other bond insurers.
The bond insurers cover only the most senior tranche, which is the safest one.
Investors in the bond insurers seemed underwhelmed, though the overall stock market was higher.
But in recent years the bond insurers started to guarantee complex securities backed by home mortgages.
Merrill is also slashing the value of hedges it had bought from various bond insurers.
The bond insurers are challenging the city's attempt to scalp them while leaving pensions unshaven.
The prospect of being left holding the bad eggs doesn't seem too palatable to the bond insurers.
Bond insurers use their top credit ratings to insure bonds issued by municipalities and others against default.
In spite of this, municipal bond insurers such as Ambac Financial (ABK) and MBIA (MBI) are somehow still solvent.
Last year the numbers dictated piling into bond insurers, investment banks and other industries on the verge of collapse.
Note what he said: The concern is about protecting the issuers and investors, but not necessarily the bond insurers.
The "AAA" financial strength rating is crucial to bond insurers because they effectively transfer their ratings to bond issuers.
Currently, he said, the bonds sell at significant discounts because of concerns about the financial health of the bond insurers.
The bond insurers have had to pay out large sums, and they're likely to face additional defaults in the future.
Lane added that he expects the bond insurers to continue to pursue alternatives and views Buffett's offer as a last resort.
The challenge for MBIA and other bond insurers will be to convince the public finance sector that insurance is still necessary.
Recently, the last of the bond insurers, or monolines, lost its AAA credit rating, marking the possible extinction of such businesses.
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Municipal bond insurers have been slammed in the market over misplaced fears.
Behind the woes of the bond insurers lies the subprime crisis.
The bond insurers have been fighting to keep their top-notch triple-A ratings.
The monoline bond insurers still have lots of potential to cause trouble.
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In the absence of a bailout, the banks could get together and form a reinsurance company to relieve the bond insurers of some of their exposure.
Large exposures as insurers of troubled derivatives to their capital bases have raised questions about the bond insurers' ability to continue writing new business.
For what it is worth, there is a rumor that Warren Buffett, who knows a lot about insurance, is eyeing an investment in bond insurers.
These bond insurers are among the best clients of the rating agencies, since the agencies pocket a fee for reviewing every bond issue being insured.
My vote for the most unjustly maligned financial sector stocks goes to the bond insurers, which guarantee principal repayment and interest for most municipal bonds.
Mr. JOE NOCERA (Columnist, New York Times): Thanks for having me, Scott, and did you ever think you would do a segment on bond insurers?
Ambac, FGIC and other big muni-bond insurers have weakened considerably.
Some bond insurers have been trying to raise capital to thwart a downgrade to their credit ratings, the effect of which would be to cripple new business.
If not, regulators would have to resort to the "good bank, bad bank" split of the bond insurers, as proposed Tuesday by Berkshire Hathaway 's Warren Buffett.
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