FGIC Corp. — the first monoline to lose its AAA status at all three major rating agencies — has asked to be split into two in order to protect the municipal bonds it insures, according to a Bloomberg report:

FGIC, owned by Blackstone Group LP and PMI Group Inc., applied for a new license so it can separate its municipal insurance unit from its guarantees on subprime-mortgages, David Neustadt, a department spokesman, said in a telephone interview.

New York Insurance Superintendent Eric Dinallo had suggested as much yesterday in testimony before the House Financial Services subcommittee on capital markets, saying he wanted to break up the monolines. “We cannot allow the millions of individual Americans who invested in what was a low-risk investment [municipal bonds] lose money because of subprime excesses,â€? he said in his testimony. “Nor should subprime problems cause taxpayers to unnecessarily pay more to borrow for essential capital projects.â€?

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