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KAI RYSSDAL: MBIA was the company getting under Wall Street’s skin today. It’s the country’s biggest bond insurer. Sounds arcane, I know, but here’s the punchline: Bond insurers guarantee investors they’ll get all their principal back plus interest if and when the bonds go bad. And today MBIA announced it’s backing far more subprime debt than anybody thought. Our New York Bureau Chief Jill Barshay has more now on what that might mean for the bond market.

JILL BARSHAY: MBIA is not the only bond insurer in Wall Street’s crosshairs. Dick Smith is a ratings analyst at Standard & Poors. He downgraded ACA Financial Guaranty to junk status yesterday. And he identified four other bond insurers with potential problems.

Smith says he’s worried about the number of subprime mortgage borrowers going bust.

DICK SMITH: The performance is far worse than had been anticipated. So what we’re concerned about is how much worse ultimately will it get? Will that lead to claims on the insurers?

Smith says insurers like ACA could end up on the hook for billions of dollars they can’t afford.

Sylvain Raynes is a structured finance adviser at R&R consulting. He says ACA is a small player in the business. But he worries how the credit markets might react to a downgrade of one of the big insurers.

Sylvain Raynes: So, this is extremely dangerous because all the transactions they have insured, we’re talking about hundreds and thousands will then be downgraded at the same time. This is a mega event that, in my humble opinion, should not occur.

Raynes says that kind of mass downgrade could trigger a huge sell-off in those bonds and drag the whole bond market down. That could make the credit crunch even worse than it is already.

Insurers have guaranteed a total of $2.4 trillion in bonds. And that’s a big chunk of the debt market.

In New York, I’m Jill Barshay for Marketplace.