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Financial Guaranty Insurance and the Cost of Raising Public Capital.

The purpose of this hearing is to evaluate and discuss the state of the financial guaranty insurance market, its effects on the cost of raising public capital, and the future of the market.

Tuesday, December 21, 2010
10:00 AM - 1:00 PM
Assembly Hearing Room, 1923
250 Broadway, 19th Floor
New York, NY

Municipalities often raise capital to fund public projects by issuing bonds and having those bonds insured in the financial guaranty insurance (FGI) market to lower the cost of raising the capital.

Following the development of FGI, the municipal debt markets thrived for many decades until the recent financial crisis when the sub-prime mortgage market experienced heavy losses that, due to the highly systemic and interconnected nature of the modern financial system, spread to the balance sheets of the guarantors who suffered severe losses. In the wake of these events, many guarantors suspended the writing of new business or went through corporate restructuring. Currently, only Assured Guaranty actively writes business. As a result, states and other localities have suffered financially as the cost of raising capital has risen during a time of fiscal difficultly.

The purpose of this hearing is to explore the circumstances leading to the crippling of the FGI market and to evaluate policy solutions to these issues including, but not limited to, A.11342-A (Morelle) which would permit financial guaranty insurers to use the net value of a qualified trust as an asset with respect to reserving requirements. This bill may therefore permit the use of new business models with lower costs of capital that could facilitate the revival of the FGI market and decrease the cost of raising public capital.

Persons wishing to present pertinent testimony to the Committee at the above hearing should complete and return the enclosed reply form by December 17th. It is important that the reply form be fully completed and returned so that persons may be notified in the event of emergency postponement or cancellation.

Oral testimony shall be limited to 15 minutes' duration and shall be by invitation only. In preparing the order of witnesses, the Committee will attempt to accommodate individual requests to speak at particular times in view of special circumstances. These requests should be made on the attached reply form or communicated to Committee staff as early as possible.

Ten copies of any prepared testimony should be submitted at the hearing registration desk. The Committee would appreciate advance receipt of prepared statements.

In order to further publicize these hearings, please inform interested parties and organizations of the Committee's interest in hearing testimony from all sources.

In order to meet the needs of those who may have a disability, the Assembly, in accordance with its policy of non-discrimination on the basis of disability, as well as the 1990 Americans with Disabilities Act (ADA), has made its facilities and services available to all individuals with disabilities. For individuals with disabilities, accommodations will be provided, upon reasonable request, to afford such individuals access and admission to Assembly facilities and activities.

Joseph D. Morelle
Member of Assembly
Committee on Insurance


Persons wishing to present testimony at the public hearing on Financial Guaranty Insurance and the Cost of Raising Public Capital are requested to complete this reply form as soon as possible and mail, email or fax it to:

Jon Lynch
Committee Assistant
Assembly Committee on Insurance
Capitol Building, Room 442
Albany, New York 12248
Email: lynchj@assembly.state.ny.us
Phone: (518) 455-4311
Fax: (518) 455-7095
I plan to attend the following public hearing on Financial Guaranty Insurance and the Cost of Raising Public Capital to be conducted by the Assembly Committee on Insurance on December 21st.
I plan to make a public statement at the hearing. My statement will be limited to 10 minutes, and I will answer any questions which may arise. I will provide 10 copies of my prepared statement.
I will address my remarks to the following subjects:

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