Not too long ago, people were widely expecting bond insurer Ambac to announce that it would separate into two units--one to insure municipal bonds and one to insure structured finance products. Well, it has not come to pass. Instead, Ambac announced a plan to raise $1.5 billion by issuing common stock and units. The New York Times notes the stock tanked on the news. It is not a foregone conclusion that the firm will lose its AAA rating, which would likely force more writedowns at top banks. But it adds to the uncertainty. You have to wonder how Eliot Spitzer will react. The issues here are profound. Still, the muni-bond industry will survive (see next item). I doubt we have heard the last of Ambac's efforts.

For more:
- here's the New York Times article

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