2008-02-07 — reuters.com
Banks are considering ending bond insurers' guarantees of their subprime investments in return for taking stakes in the troubled underwriters, such as Ambac Financial Group and Financial Guaranty Insurance Co, according to people briefed on the talks.
Under this scenario, the banks would lose guarantees on billion of dollars of exposure, but could stabilize the insurers and give the banks a chance of collecting funds from the bond insurers in the future.
Losses will have to be taken. There's no way around it. Will banks put up some money and hopefully forestall broader market fallout and losses later? And if so, will this truly be more than bailing water by the drinking glass back into a leaky dike?
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