bond insurance bail-out plan

-- New York State’s insurance regulator met with U.S. banks today to discuss raising new capital for bond insurers, or monoline insurance, as we expected yesterday; -- The stock market immediately rallies 2.5% this afternoon led by financials on this much-needed good news, and eventually reverts a straight 5-day decline since last Tuesday; -- It is interesting to draw parallels between this move with the bail-out effort led by the New York Fed in the turmoil of Long Term Capital Management crisis a decade ago: -- Both involved a coordinating government regulator: New York Fed in 1998 versus New York State Insurance Superintendent in 2008; -- Both invited relevant financial players: All the major wall-street firms in 1998 versus unnamed banks in 2008; -- Both crises were triggered by, unfortunately, fixed income market problems: Russian default in 1998 versus sub-prime defaults in 2008; -- The key firms at issue in both crises were once considered high-quality financial institutions: LTCM as the largest hedge fund in 1998 versus AAA-rated bond insurers in 2008;