-NY Gov asks Treasury to extend aid to bond insurers 02/26 02:19 PM
* Paterson suggests cash infusion of $2 bln-$3 bln * NY insurance overseer Dinallo backs idea (Adds comment from Paterson, Insurance Supt Dinallo telephone interview, background, byline) By Lilla Zuill NEW YORK, Feb 26 (Reuters) - New York Governor David Paterson has sent a letter to the U.S. Treasury asking it to extend financial aid to U.S. bond insurers, which could lower borrowing costs for municipalities and ensure funding is available for community projects. "When governments cannot borrow, projects must be delayed and workers idled, which hurts the economy and undercuts stimulus efforts," wrote Paterson in a letter Wednesday to Treasury Secretary Timothy Geithner that was released by the governor's office on Thursday. Paterson said one way to address the problem was to give bond insurers a cash infusion, suggesting between $2 billion and $3 billion, that could lead to higher credit ratings, which could be passed on to municipal bond issuers in the form of bond insurance, leading to lower financing costs. "It would be extraordinarily helpful for credit markets," said New York state insurance superintendent Eric Dinallo, who has been instrumental in helping to slowly rehabilitate the bond insurance market after many companies were blindsided by losses on mortgage-linked debt they guaranteed.