U.S. consumers barely had time to get used to the idea of $4 a gallon gasoline before prognosticators started talking about $5 a gallon fuel. And unfortunately for the U.S. economy, the worst is yet to come.

By ANDREW DOWELL
March 5, 2008 1:53 p.m.

NEW YORK -- Ambac Financial Group Inc., the battered No. 2 U.S. bond insurer, said Wednesday it will try to raise $1.5 billion in fresh capital to defend the key AAA rating at subsidiary Ambac Assurance.

This article looks at why the ratings firms should act now to repair their reputations by doing broad based downgrades. It also examines the effect this would have on GSEs and the capital adequacy ratios of many financial firms. It points out the disconnect between the rating's firms own loss projections and the ratings they have on AAA tranches.