As a bonus for spam-like junk, here is some trash that is seriously OT, but needs to get off my desktop:

1. Sometimes the notion of self-organization is conflated with that of the related concept of emergence, which refers to the way complex systems and patterns arise out of a multiplicity (disambiguation) of relatively simple interactions.

2. But consider that the U.S. consumer last year spent $9.5 trillion. Chinese consumers spent about $1 trillion, and Indians about $650 billion. The power of the American consumer is still six times that of this new “Chindian” consumer. It’s mathematically impossible to see a major decrease in U.S. consumption being made up by the Chinese and Indians.

3. Genuine poetry can communicate before it is understood. T. S. Eliot

The solution I see is evolving towards associations based on previous efforts to consolidate this problem into a new, marketable vehicle which can be monetized for the benefit of these investors that have current and future liabilities, i.e, they will solve this mess by creating a new bigger mess which will simply morph these current liabilities into disguised future liabilities which will be marketed as new credit enhancing opportunities, which they will invest in as a group of collusive gurus that play matchmakers between various groups of regulators, lobby groups, special interests and those that can benefit from invest in this new underwriting derivative.

As you say, the figures being talked about are basic negotiation rounds, as if this is a new IPO or bond to be issued and then backed by some entity.

The point here is to morph the debt into a security like Privately Issued Mortgage-Backed Securities, Custodial Receipts, or some unique entity related to certificated depositary interests, which will be off the books and spun into a trust offshore, where everyone will live happily ever after in peace and harmony!

Then as the regulatory dust settles and this trival matter is not a subject of interest by anyone that has attention deficit, many pension fund managers will see this interesting yield enhancement opportunity with this great new investment, and as with any good magic trick, the suckers wil take the bait and within an un-determined amount of time, we will return to this story and pray for The Fed to save us all!

Please note this mechanism for those in need of renting capital to either dress an ugly window or to gain a cushion or buffer from regulatory or statuary concerns: LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory 
requirements, the Fund may lend its portfolio securities to brokers, dealers 
and other financial institutions, provided that such loans are callable at 
any time by the Fund ….

It may also be a useful PR exercise to raise his public profile in a positive way. If the recession is long and deep, the populist undercurrent exemplified by Edwards and Huckabee could rise in prominence, and may seek to vilify investors in distressed companies as profiteers. Being seen as a “good guy” rescuer will give him a freer hand… after all nobody criticizes Warren Buffett for buying up assets cheaply.

A final possibility is that it’s somehow in Ross’s short term financial interest to delay the day of reckoning for Ambac by a few weeks or months, based on some positions he might be holding.

The wildest and most speculative theory of all would be that he would actually be seriously considering buying Ambac. Preposterous.

Surely it is better for the financial markets as a whole if the monolines retain their AAA rating, but the benefits are literally spread over millions of economic entities, from retirees with a lot of muni bonds, to community banks holding same, as well as the money center banks and hedge funds holding all kinds of fixed income exotica that would take MTM hits in the ensuing wave of liquidations. And the exposure of the various banks to the fallout will be highly varied (and quite difficult to quantify accurately I’d guess) making an equitable “sharing of pain” a very difficult outcome to achieve.

It is hard to see how the equity holders of the monolines fair well here. My guess is that there will be some kind of very heavy warrant coverage or some other equity derivative paired with the commitments to the credit line. The banks will be reluctant to come to the table and the monolines have no credible alternatives unless the Feds show up with a taxpayer supported bailout. The pound of flesh exacted for the capital support will be substantial.