Credit Woes Squeeze Bond Insurance Business NPR

Wall Street has a problem and over the past few weeks some of the street s most important bankers and regulators have been trying to come up with a solution. They re looking for a way to rescue a little known sector of the financial world called the bond insurance business. It s a business that plays a vital role in the finances of cities and towns across the country which use bonds to raise money for schools and bridges and sidewalks. And it s being squeezed by the ongoing turmoil in the credit markets. Bond insurance firms do business by guaranteeing payment on a bond. If you buy an insured bond and the issuer defaults you re guaranteed to get all the money that s coming to you. The trouble is that these firms have recently insured a lot of risky debt products like mortgage backed securities. These securities have suffered big losses and the insurance firms have been forced to pay out much more money in claims than they re used to. There s been no shortage of proposed solu! tions to the crisis. New York Gov. Eliot Spitzer for example has tried to prop up the firms by asking big banks to lend them capital. But banks have been slow to sign off on the arrangement. The risk right now is that bond insurance firms will get downgraded by the major credit agencies which means the bonds they insure will be worth less. That means investors who bought the bonds including a lot of major banks that have already taken big hits will suffer more losses. Related NPR Stories Feb. Bond Insurer Losses Could Have Broader Impact Feb. Buffett Offers Rescue Plan for Bond Insurers Feb. Bond Insurers Woes Hit Global Market Jan. Ailing Bond Insurers May Make Markets Queasy E mail this Page Recipient s e mail address Up to twelve addresses separated by commas. Your e mail address Your name Personal message optional characters max Your NPR member station List of local stations PDF Are you a member of your local NPR station Yes No Would you like to receive information from! your local NPR member station see NPR s privacy policy Yes No May we contact you with information about NPR programming and services see NPR s privacy policy Yes No Information collected by NPR will be used solely for internal NPR or NPR member station purposes and only if you selected yes above. See NPR s privacy policy for more information. Archives Transcripts Stations Shop About Contact Us Help Copyright NPR Terms of Use Permissions Privacy Policy More Economy Credit Woes Seep into Student Loan Market Dissecting People s Predictably Irrational Behavior More More Business Will Oscars Give Film Biz a Boost T Mobile Wants Customers to Cut the Cord More More By Jim Zarroli Analysts Weigh Recession Forecast U.S. Markets React to Fed Move More Related News Feeds Economy All Things Considered Jim Zarroli More about News Feeds Browse Topics News Nation World Middle East Iraq Politics Society Education Legal Affairs Politics Election Race Religion Election Business Economy Your Money Technology Media People Places Interviews Remembrances Radio Exp! editions Health Science Your Health Environment Climate Connections Space Health Care Books Authors Fiction Music In Performance Studio Sessions Classical Music Jazz Pop Music World Music Arts Culture Movies Performing Arts Visual Arts Pop Culture Digital Culture Reviews Diversions Fun Games Food Sports Opinion Analysis Commentary Services Radio Podcasts News Feeds Desktop Mobile Newsletters Programs News Talk Programs All Things Considered The Bryant Park Project Day to Day Fresh Air Morning Edition News Notes Talk of the Nation Tell Me More Wait Wait

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