Monoline pot pourri

It's a make your own posting for the weekend: just a few random facts which you can cook up, or not, as you see fit.

• FGIC wants to be split into two, leaving a muni insurer and the rest, primarily structured finance (of which much is U.S. RMBS, prime and subprime).
  
• There is no word as yet as to how they will work out how much capital goes to each piece, nor how the evident contractual law implications of this will be worked out.
  
• Ambac is domiciled in the state of Wisconsin. Insurance regulation is a state by state matter and so Dinallo has no authority there. The man who does, Sean Dilweg, is keeping quiet.
  
• Moody's downgrade of FGIC was Moody's from Aaa to A3, six notches. That's quite a big fall.
  
• The text of MBIA's response to Ackman's 'Dear Regulator' letter is here. Note in particular pace my earlier post about the structure of the contracts written, our reserves are based on reasonable estimates of probable losses, in accordance with the guidance [in FAS 5], i.e. insurance accounting.
  
• The text of Dinallo's testimony is here. Am I alone is detecting a note of self criticism in:

  “The primary goal of insurance regulation with respect to financial oversight is to ensure that the insurer maintains an adequate level of solvency and is able to honour policyholders’ claims. The business model for the financial guaranty insurance companies, however, requires that they hold levels of capital that will allow them to maintain the AAA rating necessary to write new business.
  
  “It has become clear that the loss of the AAA rating essentially cripples the company’s ability to do business as a going concern and puts the insurer in a “run-off’ mode. We now are considering whether the sustainability of the business model should be the regulatory standard going forward. While we of course consider claims paying ability as the benchmark, our goal for the future, for all insurers, is to do higher level risk-based examinations.

• Eliot Spitzer's position -- that reverberations from the crisis facing the bond insurers could cause "substantial damage" to the US economy -- certainly seems reasonable considering the write offs at UBS. And on Friday Citi estimated that there are another $18B to come. More generally bank default swap spreads have gone out in response to the monoline break up plan.
  
• On the bright side, though, there is at least a credible new ratings system proposal here.