The Judge handling Ambac

Ambac's headquarters are in the financial district of lower Manhattan. But the business was founded in Wisconsin in the early 1970s and has kept its legal residence here.

That gives broad regulatory authority over Ambac to state Insurance Commissioner Sean Dilweg. Late last month, alarmed over Ambac's deteriorating financial condition, he petitioned Johnston to take control of about $64 billion worth of shaky policies insuring mortgage-backed securities and other troubled assets.

It's sort of like a bankruptcy reorganization proceeding. The parties Ambac has promised to pay if the bundles of mortgages or other assets go into default - which many have - figure to get a fraction of what they are contractually owed in cash, with an I.O.U. for the rest.

The idea is to preserve Ambac's assets to cover its long-term obligations, including much of its primary business as one of the country's main insurers of municipal bonds. Without restructuring, Ambac's resources could be drained if it kept paying out fully on its riskier, shorter-term obligations.

Not only is big money at stake, but the case is strewn with the financial arcana - collateralized debt obligations, credit default swaps, residential mortgage-backed securities - that helped touch off the worst recession since the 1930s.

No wonder Wisconsin's move on Ambac has drawn national attention.