MUNICIPAL FINANCE A handful of insurers write coverage protecting municipal bondholders against default by the issuing municipalities. Last year, Orleans Levee District needed to refinance $36.3 billion in past indebtedness incurred to repair levees and breakwaters. The District's underwriters sold bonds for "forward delivery" in that amount insured by MBIA, the biggest muni insurer. Payment of the bonds was to be financed by a special tax on real property located within the District. I doubt they'll be collecting much -- or any -- of that tax for quite a while. Now, MBIA is invoking the "material change" clause of its contract to cancel coverage. The deal is off and the underwriter can't deliver the bonds. The District is responsible for 190 floodgates and 129 miles of levees and floodwalls. "New Orleans levee bonds pulled as MBIA won't insure" By EDDIE BAEB BLOOMBERG NEWS September 10, 2005) http://www.thejournalnews.com/apps/pbcs.dll/article?AID=/20050910/BUSINESS01/509100348/1066 The article also says that rating agencies have downgraded $10 billion of previously issued bonds of municipalities apparently in the Gulf Coast region.