Ambac Rescue Involves Others Besides Exposed Banks

The group of banks working to bail out Ambac Financial Group includes private equity and other financial firms that have no exposure to the troubled bond insurer, signaling optimism that Ambac will be able to make money in the future, CNBC has learned.

As reported, the group of banks--which includes Citigroup
Citigroup Inc  and Wachovia Group has worked out a framework to inject up to $3 billion in capital into Ambac. The bond insurer is in danger of losing its crucial triple A debt because of its exposure to risky subprime-related debt.

The banks are trying to save Ambac, as well as other bond insurers, because a ratings downgrade could force the banks themselves to write down billions more of their own debt that is backed by Ambac's insurance and current Triple A rating.

Though it's unclear the extent of the involvement by private equity and unexposed banks, the development is significant because it shows they expect to gain from investing in Ambac, not merely protect themselves from further losses.

The consortium of banks is now trying to sell the bailout plan to the rating agencies to save Ambac's triple-A rating. Rating agency approval is crucial because  bankers want to make sure that Ambac isn't downgraded after they put money into the  bond insurer.

Though Standard & Poor's reaffirmed Ambac's rating on Monday, the insurer is still under review and could be downgraded in the coming days until details of the proposed recapitalization are presented and approved.

The big rating agencies--which also include Moody's and Fitch --have been widely criticized for not catching the growing debt problems at the bond insurers earlier, so it's not out of the question that they will demand more capital be injected into Ambac.

Moody's and S&P, meanwhile, have reaffirmed the Triple A rating on MBIA, the nation's biggest bond insurer.