The triple-A ratings at bond insurers MBIA (MBI) and Ambac (ABK) could soon be under scrutiny again. Moody’s said Tuesday that rising losses on bonds backed by second mortgages could hit ratings at insurers that have guaranteed second-lien residential mortgage-backed securities.

“Moody’s now expects 2005 vintage subprime second lien pools to lose 17% on average, 2006 vintage pools to lose 42% on average, and 2007 pools to lose 45% on average,” Moody’s said. “Moody’s loss expectations for this asset class are higher than previously anticipated, owing to worse-than-expected performance trends. This could have material implications for the estimated capital adequacy of financial guarantors most exposed to this risk.”

The comments come a day after MBIA posted a $2.4 billion first-quarter loss but spent much of a two-and-half-hour conference call explaining why it doesn’t believe it will need to come to market to raise more capital. CEO Jay Brown told investors he believes the company can make up a $1.7 billion shortfall relative to Moody’s triple-A capital targets over the next two quarters, through he conceded he doesn’t expect the company to get a stable outlook until house prices bottom out, which he said probably won’t happen till at least next year. The improved outlook may be even further off now, given Moody’s comments Tuesday. “Moody’s intends, in the short term, to assess whether worsening performance in this sector is likely to be material for exposed financial guarantors, and will update the market as appropriate,” the rating agency said.

MBIA (MBI) isn’t looking to raise more capital. The bond insurer’s CEO, Jay Brown, said in his latest letter to shareholders Tuesday evening that “in my view we have adequate equity capital to get through this crisis and it makes no economic sense to our current owners to raise equity capital at today’s price levels.” The comments come ahead of next Monday’s scheduled first-quarter earnings release, in which Wall Street analysts expect MBIA to post a loss as large as $2.42 a share.

The capital-raising question returned to the fore last week, after rival Ambac (ABK) posted a $1.7 billion loss, prompting analysts at Goldman Sachs to project that MBIA and Ambac would need to return to the market to raise $3.4 billion apiece to rebuild their slimming cushions against future losses. Ambac rejected that notion, saying it expected normal cash inflows from insurance premiums to help it to maintain its financial strength, and MBIA said much the same thing Tuesday. Referring to insured mortgage transactions that are expected to lead to future losses, Brown wrote, “Despite external speculation to the contrary, our insurance business model is constructed to handle most, if not all, of these payments from normal cash flow of the business.”

Brown also warned shareholders to prepare for another big mark-to-market loss, as the wide spreads in the credit markets reduce the value of MBIA’s derivatives holdings. Brown won’t say how big that number is, as MBIA is still working through the math. But, he adds, “I can tell you with great certainty that no two people could ever agree on this calculation, so don’t be surprised when external sources propose wildly different possibilities for MBIA.”

Ambac’s (ABK) finances continue to look stretched. The bond insurer said late Friday that it and its Ambac Assurance unit “remain in full compliance with the terms and conditions of their $400 million credit facility which remains undrawn.” The comment comes just over a week after Ambac posted a $1.7 billion first-quarter loss, prompting analysts at Goldman Sachs to say they expect Ambac and rival MBIA (MBI) each to have to raise $3.4 billion in new capital.

Ambac said after its first-quarter earnings report that it didn’t expect to have to return to the market for new money any time soon, but the company’s comments Friday show why investors remain concerned. “While our preliminary calculations suggested that there may be a modest non-compliance to the minimum net assets requirement, we can now confirm that we are in compliance by approximately $65 million,” said finance chief Sean Leonard. “The difference relates to an adjustment that properly reflects the full tax benefit associated with our first quarter results.”

Ambac said that while it’s in compliance now, it “will continue its discussions with the lender banks to provide additional flexibility relating to the credit facility.” By all indications, Ambac is going to need every bit of that flexibility.

Private-equity firm TPG is looking to play a bigger role in the financial sector. The firm, which earlier this month led a group that invested $7 billion in Washington Mutual (WM), has been discussing closer ties with Merrill Lynch (MER), the Financial Times reports. Merrill chief John Thain has said Merrill doesn’t need new capital, but TPG is “hoping to get the first call” if that changes, the FT reports. Merrill has also talked with TPG and others about being co-investors in the firm’s private-equity ventures, The Wall Street Journal reports.

TPG isn’t limiting its discussions to Merrill, however. Reuters reports that the private equity firm, run by David Bonderman, has held a number of discussions with other financial institutions in recent months as it seeks to put $20 billion in “dry powder” to work. TPG was among the buyers of $12 billion of leveraged loans from Citi (C) last week, Reuters reports. It adds that TPG “aims to position itself as one willing and able to put up capital for minority stakes in financial institutions” as firms tally up the damage from the credit crunch. With Goldman Sachs analysts predicting this week that Ambac (ABK) and MBIA (MBI) alone will need to raise $3.4 billion each, it seems clear that there will be plenty of opportunity for firms like TPG to make their mark.

Ambac (ABK) is back in the news with another eye-popping quarterly loss. The bond insurer, which grabbed headlines in January and February with its successful, if closely scrutinized, efforts to raise new capital, said Wednesday morning it lost $1.66 billion, or $11.69 a share, in the first quarter. The loss compares with a year-ago profit of $213 million, or $2.02 a share, and includes some $3 billion in writedowns and charges. Ambac lost $3.3 billion, or $31.85 a share in the fourth quarter.

While some of the latest profit hit comes from mark-to-market losses, Ambac said it took $940 million in credit impairment losses on collateralized debt obligations it insures and $1 billion in loss provisions on insured residential mortgage-backed securities. That’s noteworthy because the company has previously contended that mark-to-market losses reflect the overwrought market environment and may be reversed in future periods; Ambac makes no such claims about credit impairment. The steep losses raise the question of whether Ambac will, like so many financial firms, be forced back into the market for more capital, though Ambac suggests otherwise. “We currently exceed S&P’s AAA target level of capital by a comfortable margin and we expect to meet our goal of exceeding Moody’s Aaa target level of capital in the second quarter,” CEO Michael Callen said. “Importantly, we generated positive operating cash flow during the quarter.”

Still, the company - which along with rival MBIA (MBI) has seen its once-lucrative municipal bond underwriting business slow sharply in the wake of its financial difficulties, said it is drawing new business again. “Our team of professionals is working hard on restoring market faith in the Ambac brand,” Callen said, “and we have recently started to see some business come our way in the municipal markets.”

The shoe’s on the other foot at Ambac (ABK). The bond insurer saw its shares rise 10% in early action Tuesday after Ambac said it “has no material exposure to Bear Stearns (BSC) in its financial guaranty and financial services businesses.” The company said Bear, which has agreed to be purchased by JPMorgan Chase (JPM) for $2 a share, “has substantially collateralized its exposure to Ambac under its interest rate and cross-currency swap agreements.”

Ambac, of course, is no stranger to worries about trading partners’ exposure to possible losses. The company raised $1.5 billion last month to bolster its capital cushion, staving off a ratings downgrade that investors and regulators were concerned would lead to a financial system meltdown. Bear’s purchase by JPMorgan, of course, was fueled by the same worries, as the Fed agreed to backstop $30 billion worth of Bear’s assets to entice JPMorgan to do the deal. Ambac’s own brush with meltdown talk has taught the company the value of full disclosure, CEO Michael Callen says in a statement. “We understand that, in times of market stress, it is particularly important to communicate this information with investors and our other constituents,” he says.

The stock market found its footing after a midafternoon fall, but Ambac (ABK) is still taking it on the chin. Shares of the bond insurer were off 19% after the company set plans to raise $1.5 billion in offerings of common shares and equity units. The deal should allow the company to maintain its triple-A insurance rating, saving Wall Street firms from billions of dollars of writedowns. But in a break with recent history, existing Ambac shareholders are showing they aren’t happy about seeing the company more than double its equity base overnight.

One group that is understandably pleased is the regulators who got the banks, bond insurers and ratings agencies talking earlier this winter. “Combined with the prior affirmation of MBIA’s credit ratings,” New York Gov. Eliot Spitzer said in a midafternoon statement, “eliminating concerns about Ambac’s ratings should have broad benefits for the financial markets and provide stability for the municipal bond market.” Can’t argue there.

Stocks sold off Wednesday afternoon after Ambac (ABK) unveiled its long-awaited capital-raising plan. Ambac said it will raise $1.5 billion or more by selling “at least” $1 billion worth of common stock and $500 million worth of equity units.

“In this offering, we are targeting our core investor base, the long term holders of our stock, who have been loyal to Ambac,” said CEO Michael Callen.

The deal aims to preserve Ambac’s triple-A rating and save Wall Street banks that hold Ambac-insured bonds from another round of costly writedowns. Wednesday’s agreement comes six weeks after New York insurance regulators got the bond insurers, banks and ratings agencies talking in an effort to stave off a downgrade.

But in the form outlined in Wednesday’s press release, Ambac’s capital-raising plan is smaller than the arrangements being discussed in the press in recent days. Reports on CNBC and in the Financial Times had Ambac raising at least $2 billion.

“This capital raise, along with our recent strategic actions, our increased emphasis on risk-adjusted returns over the course of an economic cycle and a six-month suspension of the structured finance business, will strengthen our capital base,” Callen said. “We expect to be better positioned to take advantage of the current favorable market environment for credit enhancement.”

Ambac shares plunged 12% on the news. Shares of rival MBIA (MBI) dropped 4% after earlier trading higher on reports that an Ambac capital plan was near.

Ambac (ABK) could finally get its capital infusion this week, but a deal apparently won’t include a split of the company’s muni bond insurance arm from its riskier structured finance side. The Financial Times reports eight banks led by Citi (C) and UBS (UBS) are preparing to inject $2 billion or more into the company, which has seen its shares swoon over the past year as investors fretted that Ambac would lose its triple-A rating. An agreement could be announced as early as Wednesday, the FT reported, and could for now forestall any prospect of a damaging downgrade by the ratings agencies. Moody’s said Friday that it was still reviewing Ambac’s ratings for a possible downgrade because the company’s capital levels fell below the agency’s triple-A target levels. Moody’s and S&P recently affirmed their triple-A ratings on Ambac rival MBIA (MBI), which has raised $2.6 billion this year and indicated last month that it plans to split its muni and structured businesses within five years.

Even if Ambac does get its capital infusion, it and MBIA are facing a drastically changed landscape. Some municipalities have gone to Berkshire Hathaway Assurance to insure bonds that already carry an Ambac or MBIA wrap, Berkshire (BRKA) chief Warren Buffett said Monday. And now California is dropping insurance of municipal bonds altogether, CNBC reported. A spokesman for the state treasurer’s office sums up the big problem for the bond insurers:  “In the current market - and given the condition of the bond insurers - it makes no sense” to pay for insurance.

Berkshire Hathaway (BRKA) has found a novel way to profit from the bond insurance mess. CEO Warren Buffett said on CNBC this morning that Berkshire has started writing insurance policies on some municipal bonds that already are insured by struggling bond insurers Ambac (ABK) and MBIA (MBI). Issuers began seeking out additional insurance amid worries that Ambac or MBIA could face downgrades that could set off a wave of selling by institutions that aren’t allowed to hold bonds unless they carry a triple-A rating. Berkshire last month offered to take over MBIA and Ambac’s muni businesses in exchange for $9 billion in payments - an offer that Buffett admitted Monday found no takers.

Even so, Buffett’s comments offer the latest evidence that risk-averse municipalities have been backing away from MBIA and Ambac. MBIA said last week in its annual report filed with the Securities and Exchange Commission that it was writing “very little” new bond insurance business amid worries about possible downgrades. Ambac, for its part, recently slashed its quarterly dividend for the second time this year in a bid to conserve cash. Both companies have said they will face additional writedowns tied to mortgage-market declines early in 2008. The worst of the downgrade worries appear to have lifted for now, but these companies need to find new business if they’re going to avoid being forced into runoff.