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) posted another big loss. The bond insurer lost $2.4 billion, or $13.03 a share, for the first quarter ended March 31, compared with the year-ago profit of $199 million, or $1.46 a share. The latest quarter included a $3.6 billion mark-to-market writedown on MBIA’s insured credit default swap portfolio. The news, which follows a $2.3 billion fourth-quarter loss, comes a week after CEO Jay Brown insisted the company doesn’t need new capital and warned shareholders that the company was struggling to arrive at a valuation for the insured credit default swap portfolio. “I can tell you with great certainty that no two people could ever agree on this calculation,” he wrote, “so don’t be surprised when external sources propose wildly different possibilities for MBIA.” Brown is due to host a conference call at 2 p.m. EST, so the external sources may have their say then. MBIA shares fell 12% in early trading Monday to $8.30.

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.

It still pays to fail. MBIA (MBI) chief Gary Dunton was forced out of the bond insurer last month as the company sought to make nice with regulators led by New York’s top insurance watchdog, Eric Dinallo. But Dunton, who stepped aside for the return of Jay Brown, won’t leave empty-handed. MBIA said Tuesday in a preliminary proxy filing with the Securities and Exchange Commission that Dunton got a $1 million bonus for 2007 - a year in which MBIA shares lost 73% of their value - plus $960,000 for his efforts in raising $2.6 billion in new capital earlier this year. And that’s not all. Dunton also gets $2.55 million in cash settlement of a long-term incentive grant that won’t be paid out, and $241,000 in pro-rated bonuses for 2008 - even though MBIA shares have fallen this year. All told, Dunton is departing with $5.2 million, MBIA says - and this for doing his job in a way that led MBIA’s board to conclude that Brown is “singularly qualified to lead the company during what it believes to be the most serious challenge in its 34-year history.” Bravo.

The battle between Fitch and MBIA (MBI) has taken another twist. The rating agency’s CEO, Stephen Joynt, responded this week to MBIA’s recent request that Fitch withdraw its insurer financial strength rating on MBIA and some subsidiaries. MBIA said Friday that Fitch’s model differs from those of Moody’s and S&P, a discrepancy that could confuse investors. But Joynt asks what the company’s real motivation is, given that the other rating agencies recently reaffirmed MBIA’s triple-A rating, while Fitch is considering a possible downgrade.

“Your conflicting views lead me to question whether it is the Fitch capital model, rating process or fees that you object to or rather is it that you are aware we are continuing our analytical review and may conclude that, in our view, MBIA’s insurer financial strength is no longer ‘AAA,’” Joynt writes in a letter dated Monday. “I believe the central issue is MBIA’s financial strength and the value of your insurance policies to investors, not the value of an IFS rating. It seems an unusual first step in attempting to rebuild MBIA’s reduced credibility with investors to limit information, decrease transparency and restrict ‘informed opinions’ (which I believe Fitch has) just because we may not conclude that MBIA is a ‘AAA’ company.”

MBIA (MBI) chief Jay Brown says the market is vastly underestimating the bond insurer’s financial strength. Brown, in his latest letter to MBIA’s shareholders, says the market for credit default swaps indicates MBIA has a 60% chance of defaulting on its debt in the next five years. But he calls that bet “perplexing,” saying the company faces no principal payments and just $80 million of interest payments over the next year, and holds $1.6 billion in cash and short-term investments.

Of course, it’s not MBIA’s own numbers that the market is worried about. Critics have been more focused on how MBIA will shoulder future claims tied to its guarantees of collateralized debt obligations and other deteriorating mortgage-related securities. Brown doesn’t spend much time addressing those concerns, though he says the company’s $28 billion of insurance-guarantee liabilities “are backed fully by the $28 billion of existing assets dedicated to this asset/liability management business that also reside at MBIA Inc.” That’s not to say that Brown doesn’t regret MBIA’s foray into the CDO business: “Make no mistake about it, we wrote some business that in hindsight we wish we hadn’t, and those decisions have certainly had an impact on the market’s confidence in MBIA,” he writes.

Still, he insists it makes no sense for MBIA credits to trade as if the company is in dire straits financially and wonders, referring to investors who have bet against MBIA, “is it just that we are being used as a ping-pong ball in a high stakes games by the big guys?”

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.