Ambac Financial Group and other US bond insurers are working on a plan to submit to the US Treasury that would enable them to sell troubled assets to the government, said Ambac’s CEO Michael Callen, reports Bloomberg. The companies also may present a proposal next week that would allow the insurers to guarantee some assets with government backing, but are not asking the Treasury to buy a stake, he added. The US Treasury’s $700bn programme to buy troubled assets may allow the two guarantors to dispose of bonds backing CDOs that they guaranteed, RBS said in a research report. Banks also may be more willing to cancel credit-default swap contracts they bought from bond insurers if the banks can sell the underlying CDOs to the government, the reports said. The Treasury said Thursday it is not considering buying equity holdings in bond insurers.

This entry was posted by Gwen Robinson on Friday, October 17th, 2008 at 5:39 and is filed under Capital markets. Tagged with Ambac. Edit this entry.