by Calculated Risk on 6/15/2009 07:48:00 PM

From the WSJ: Banks Challenge N.Y. Insurance Regulator Over MBIA Split

A group of large banks stepped up their fight against MBIA Inc.'s decision to split its businesses, filing a petition claiming the New York State Insurance Department had no right to approve the move.

The banks contend the move benefited some policyholders at the expense of others.

The 18 financial institutions, which include Barclays PLC., Bank of America Corp. and J.P. Morgan Chase & Co ...

The New York State Insurance Department earlier approved MBIA's restructuring plan to split its municipal-bond insurance business from its mortgage-backed securities insurance business. Many banks and hedge funds bought MBIA insurance on their structured product portfolios, and they are concerned about the financial strength of the MBS insurance business (and whether they will be paid or suffer further losses).