Two New York Senate Committee chairmen have raised the possibility of investigating bond insurer MBIA’s behavior in applying for a transformation of the company in 2008 and 2009.

Senate Insurance Chairman James Seward and Senate Investigations & Government Operations Committee Chairman Carl Marcellino on Wednesday issued a news release saying they were “considering conducting an inquiry and holding hearings related to the company’s 2009 restructuring that was approved by the former New York State Insurance Department.”

A trial began this week in New York Supreme Court in which two banks are suing MBIA over the division of the company into two parts, a municipal bond insurer and a subsidiary that insured asset backed securities owned by the banks.

“The ongoing litigation [between two banks and MBIA] pertains to allegations that MBIA withheld material information from the state insurance department when MBIA sought the department’s approval for the company’s restructuring.”

“At this point [the senators] are just trying to keep an eye on the court hearing and if it turns out there is a need for a Senate hearing, then they would move forward,” said Jeffrey Bishop, spokesman for Sen. Seward.

MBIA’s lead attorney Marc Kasowitz said that one of the two banks in the hearing, Bank of America, hired former Republican United States Senator for New York Al D’Amato’s consulting firm Park Strategies at the beginning of the case. The two senators who sent out the press release are Republicans and friendly with D’Amato, said Kasowitz.

“Today’s announcement from the New York State Senate reflects one of many false allegations by the banks that we will address in the course of the Article 78 hearings that began earlier this week,” MBIA said in statement. “As acknowledged by the Department of Financial Services in their filings with the Court, the Department had full and unlimited access to information in connection with their evaluation of Transformation. We remain confident that the Court will uphold the New York State Insurance Department’s approval of Transformation in the Article 78 proceeding brought by Bank of America and other banks almost three years ago. We intend to fully cooperate should the Senate decide to proceed with an inquiry or hearings.”

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