[JumpCrisscross]

Note that much of Detroit's debt is insured by monoline insurers who viewed the probability of a majour U.S. city entering Chapter 9 in the way S&P and Moody's viewed a nationally correlated housing meltdown pre-2008. I have not yet seen how this bankruptcy will (a) affect the monolines' solvency, or, (b) change their behaviour around municipal credit wraps.

[prostoalex]

On (a) there ya go:

http://www.bloomberg.com/news/2013-07-12/detroit-s-20-offer-...

[JumpCrisscross]

Interesting. Though the article, from 12 July 2013, quotes a 20% recovery rate on Detroit's GO bonds (it's somewhat humorous to see Detroit's "full faith and credit"-backed bonds referred to as unsecured by Bloomberg). I'm seeing the market buzzing around 75 to 80.

Assuming a 75% recovery rate and 95% coverage, that means the monolines would be liable for about $475 million. I'm not sure (a) what fraction of the capital of U.S. monoline which insure municipal debt that is, or, (b) how that is distributed across variably capitalised muncipal monoline insurers.