by Calculated Risk on 1/18/2008 02:46:00 PM

From MarketWatch: Fitch cuts Ambac rating to AA from AAA

This will probably mean some more write-downs from the banks.

Added: For a discussion of the possible implications, see Alistair Barr's piece at MarketWatch: Bond-insurer woes may trigger more write-downs (hat tip Barley)

Just when you thought it was over, trouble in the $2.3 trillion bond-insurance business could trigger another wave of big write-downs from banks and brokerage firms, experts said Friday.
...
Bond insurers agree to pay principal and interest when due in a timely manner in the event of a default -- a $2.3 trillion business that offers a credit-rating boost to municipalities and other issuers that don't have AAA ratings. Without those top ratings, their business models may be imperiled.
...
The destruction of the bond insurers would likely bring write-downs at major banks and financial institutions that would put current write-downs to shame," Tamara Kravec, an analyst at Banc of America Securities, wrote in a note Friday.