Eliot Spitzer has threatened to break up bond insurers if they cannot come up with more capital soon. William Ackman, who has called for a ratings downgrade of MBIA and Ambac, also has threatened to break up bond insurers in a document sent to regulators, reports the Financial Times. The general idea is to separate the muni bond operations, which would presumably be given AAA ratings, from the ultra risky structured finance operations. This would return stability to the muni bond world. The idea has been pooh-poohed by the companies, which suggest Ackman just wants to make money on his short positions. But we'll see if it emerges as the only option.  

For more:
- here's the Financial Times article

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