by Calculated Risk on 11/05/2007 07:35:00 PM

From Bloomberg: Fitch May Downgrade Bond Insurers After New Test

Fitch Ratings may lower the AAA credit ratings on one or more bond insurers after a new review of the companies' capital takes into account downgrades of collateralized debt obligations that they guarantee.

Fitch said it will spend the next six weeks reviewing the capital of insurers including MBIA Inc., Ambac Financial Group Inc., CIFG Guaranty and Financial Guaranty Insurance Co. ... Any guarantor that fails the new test may be downgraded within a month unless the company is able to raise more capital ...

``It's safe to say our expectations have taken a turn for the worse,'' said Thomas Abruzzo, an analyst with Fitch in New York. ``What we thought was hypothetical based on analysis done in the summer has become the base case.''

"What was hypothetical has become the base case." Great line!