Insurer Woes Could Hit Banks

Also, Citigroup's(C Quote) CEO Chuck Prince felt pressured to resign amid the announcement that the big bank would see writedowns as high as $11 billion.

A mess related to monoline insurers could further add stress to such firms and pale in comparison to their current worries, given that those insurers account for some $2.4 trillion to $2.6 trillion of municipal bonds and structured debt such as CDOs.

Josh Rosner, managing director at research firm Graham Fisher in New York told TheStreet.com the monoline problems could be a jagged pill to swallow for some of the major firms, because they act as counterparties, providing additional protection for investors in the form of derivative securities known as credit default swaps.

Credit default swap exposure for some of the big banks could be in the order of $200 billion to $300 billion, if monoline insurer downgrades become a reality, Rosner notes.

If that scenario plays out, the next hit could be Wall Street bonuses.