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'Detroit' is seen on the top of an iron man-hole cover on a street in Detroit, Michigan July 27, 2013. Detroit, a former manufacturing powerhouse and cradle of the U.S. automotive industry, filed for bankruptcy protection on July 18.
'Detroit' is seen on the top of an iron man-hole cover on a street in Detroit, Michigan July 27, 2013. Detroit, a former manufacturing powerhouse and cradle of the U.S. automotive industry, filed for bankruptcy protection on July 18.
(Rebecca Cook/Reuters)

FINANCIAL TIMES

Detroit fallout could hit already-weak bond insurers

Lex is a premium daily commentary service from the Financial Times. It helps readers make better investment decisions by highlighting key emerging risks and opportunities.

Why would a company create a new subsidiary to do what the rest of the company already does? Assured Guaranty, the bond insurer, unveiled a new, um, bond insurer last week. Called Municipal Assurance Corp, or MAC, it will insure U.S. municipal bonds. The idea seems to be that MAC will be untainted by the bad mortgage guarantees that its parent wrote before the financial crisis.