Monolines are either going down the good bank/bad bank route (with CDS/CDO counterparties taking a hit) or mothballing operations for 2-5 years until (they hope) this crisis has blown over. As they only have to pay timely principal and interest on debt they have insured, they should be able to limp along for a good few years.
Unless the US economy tanks big time (e.g. a repeat of the last 12 months - increasingly a possibility), in which case they will breach regulatory capital limits, get taken over by the NY state regulator and prompt a firesale of assets with onward impact on bank's CDS/CDO mark to markets (both on monoline collateral and their other collateral).
Monolines seem to have dropped out of the picture of woe of late, but they remain a festering boil on the arse of the global banking system.
Monty
