December 27, 2007 (LPAC)--ACA Financial Guaranty Corp., an insurer of corporate bonds, and a unit of ACA Capital, announced in an SEC filing that it had agreed to give control to Maryland state insurance regulators to avert bankruptcy. According to a Nov. 21, 2007 press release by the Maryland Insurance Administration, the state's insurance commissioner had called for a "targeted financial examination" of ACA Financial Guaranty to determine its financial exposure to recent and continuing delinquencies and loan defaults in the subprime mortgage loan market after it had been put on a credit watch by Standard & Poors.

Like the threat by California Governor Arnold Schwarzenegger to declare an "economic state of emergency" because of a projected budget deficit, the Maryland government takeover of ACA is an indication of the total failure of the Bush Administration's policies, said Lyndon LaRouche. These events show, said LaRouche, that as of January 3, 2008, the entire U.S. economy is in a "state of emergency."

ACA Financial lost its investment-grade credit rating last week, when S&P took the next step and downgraded its rating to the level of junk. According to Bloomberg.com, S&P's rating cut was triggered by ACA posting a $1.04 billion third-quarter loss in November, after which it had $1.1 billion to cover potential losses of $7.1 billion on the bonds it has insured.

Under the new management arrangements, ACA will seek approval from the Maryland Insurance Administration before pledging or assigning assets, paying dividends or entering into "certain material transactions." In return, the Maryland regulator will hold off proceedings against the company. A Baring Asset Management figure is quoted by Bloomberg, that "It still looks like bankruptcy is inevitable."