Update: both keep their Aaa rating so this spill out is not today, may be later.
"... Dec. 17 (Bloomberg) -- Moody's Investors Service's warning that the top credit ratings of FGIC Corp. and three other bond insurers may be cut casts doubt on $1.2 trillion of municipal, corporate and asset-backed securities. *
...
The companies guarantee the timely payment on debt issued by local governments and by Wall Street firms that package existing bonds backed by items including payments on home equity lines of credit into new securities. If the insurers lose their Aaa ratings, so too may the securities they guarantee, forcing some holders to sell the bonds because of their investment guidelines.
``Everyone understands the systemic risk if even one of these companies is downgraded,'' said Peter Plaut, an analyst at hedge fund manager Sanno Point Capital Management in New York.
...
Ambac and CIFG have taken steps to shore up their finances to help avoid a downgrade that would cripple their business. The bond insurers assign their Aaa stamp to
more than $2.4 trillion of debt.
{Billy T comment: Where, when and how will it end?}
...
The announcement by Moody's may cause the prices investors pay for all but the safest of government securities to continue to decline, Fabian said. ``The market doesn't know what to do with these bonds,'' he said. ``We could see a flight to quality, not just in the municipal market but in the taxable market.''
FROM:
http://www.bloomberg.com/apps/news?pid=20601087&sid=axq9jHTd4c4s&refer=home
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*Not much talked about, but the fall in home values is reducing the municipal tax base. Some cities will default on their bonds. (If I remember correctly, Redwood, CA had to a few years back, and that was in "good times" with rising property values.) Again, Where, when and how, will it end?
