S&P Warns of "Ripple Effects"

Standard & Poor's, New York, has warned that mortgage-related downgrades of bond insurers could have ripple effects that disrupt new areas of the market and possibly cause problems for some banks. "Bond insurers are suffering as a result of their roles as guarantors of mortgage-related securities, and downgrading them could affect all markets in which they are active, including the municipal bond, commercial mortgage-backed securities, and other structured finance areas," S&P credit analyst Tanya Azarchs said. She added, "The specific, identifiable effect on banks may be significant and, in a few cases, could lead to downgrades." Bond insurers that S&P has downgraded include Financial Guaranty Insurance Co. and ACA Financial Guaranty Corp. In addition, S&P has placed the top investment grade ratings of MBIA Inc., Ambac Assurance Corp. and Security Capital Assurance Ltd. on CreditWatch Negative.