Report: Banks Plan Ambac Rescue

A group of major banks are cooperating in an effort spearheaded by New York regulators to bail out troubled bond insurer Ambac Financial(ABK), CNBC reported Friday.

The group, which includes Royal Bank of Scotland(RBS), Wachovia(WB), Barclays(BCS), UBS(UBS), Societe Generale, BNP Paribas, Dresdner and Citigroup(C), is trying to work with New York State Insurance Commissioner Eric Dinallo, who already is at wok fashioning a bailout plan, the business network said.

Ambac and rival MBIA(MBI) have been under fire as the major ratings agencies have assaulted their triple-A ratings -- critical to their business of insuring municipal and corporate debt. The firms' increased foray into insuring exotic mortgage-related securities, which have plummeted in value during the credit crisis, has caused many to question whether they can pay issuers of that debt should it default.

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