But banks have been preemptively slashing the values on their subprime-linked securities, figuring many of those guarantees won't materialize. And unless the ratings of Ambac and MBIA fall several notches to junk status, the additional losses for big banks would total between $30 billion and $40 billion. It's not an insignificant sum. But it's still far less than the $100 billion in writedowns Wall Street has already taken. As a result, many banks may be calculating that any losses they suffer could be less than the tens of billions Dinallo is demanding to prop up Ambac and MBIA.
Investors, then, may have to brace for more pain, though it's not likely to be crippling. "A bailout is not going to happen," says Robert B. Lamb, a professor at New York University's Stern School of Business. "The downgrades are inevitable, and investors will have to take losses."
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