CHICAGO, Feb 2 (Reuters) – The $2.7 trillion U.S. municipal bond market has found for the most part that it can exist without insurance, but that is not stopping some new guarantors from revving up to enter the business.

MBIA Corp’s <MBI.N> National Public Finance Guarantee Corp, Municipal and Infrastructure Assurance Corp (MIAC) formed by Australia’s Macquarie Group Ltd <MQG.AX> and Chicago hedge fund Citadel Investment Group, and The BondModel Co have all announced plans to back muni debt.

In addition, the National League of Cities has been trying to secure a $5 billion, 10-year U.S. government loan to capitalize a mutual insurance company for muni issuers unable to afford the credit enhancement their debt needs to become marketable.

But so far none of these plans have reached the fruition stage amid a murky future for bond insurance.

CHICAGO (Reuters) – Illinois Governor Pat Quinn is under attack for a plan to save his financially ailing state money by speeding up the release of prisoners who served just a fraction of their sentences.

Of the more than 1,700 inmates released for good behavior since mid-September under an accelerated early-release plan, 56 were already back in prison for parole violations or new infractions, according to Quinn. An analysis by the Chicago-Sun Times on Wednesday found 20 prisoners had previously served time for serious crimes such as murder or attempted murder.

As the recession depletes their coffers, U.S. states are looking in every corner of government for ways to save money, and some are squeezing their prison budgets.

In 2009, 12 states passed legislation to create a program for early releases of inmates or to expand eligibility or increase the amount of time an inmate can earn under an existing program, according to Alison Lawrence, a policy specialist at the National Conference of State Legislatures.

CHICAGO (Reuters) – Moody’s Investors Service on Tuesday downgraded Illinois’ general obligation bond rating to A2 from A1, citing the state’s financial woes stemming from the U.S. recession.

Moody’s cut other Illinois ratings, affecting about $24 billion of outstanding debt, including the state’s Build Illinois sales tax revenue bonds, also cut to A2 from A1.

The downgrade gave Illinois the second lowest U.S. state rating from Moody’s, with California having the lowest at Baa1, a Moody’s spokesman said.

Moody’s said Illinois has yet to take action to tackle a structural budget gap of more than $11 billion, equal to about 35 percent of its expenditures.

CHICAGO (Reuters) – The Federal Reserve’s low interest rate policy is meant to encourage investors to move into riskier assets in order to promote economic recovery, and there are no signs currently the policy is resulting in the build-up of a U.S. asset bubble, the central bank’s number-two official said on Monday.

Fed Vice Chairman Donald Kohn said the recent rise in asset prices reflects several factors: the reversal of the “extreme panicky conditions” of late 2008, the turnaround in economic prospects, and ultra-low interest rate policies in the United States and other key economies.

Many investors, scarred by the damage wrought by the bursting of the housing bubble, are wary of the potential of new bubbles building as a result of ultra-low interest rates in key countries.

Kohn underscored why the low rates are critical to an economic recovery.

CHICAGO, Nov 10 (Reuters) – Just over a year since Lehman Brothers’ municipal bond operation morphed into Barclays Capital, the new name in the muni market has proven to be a contender.

Barclays won its first competitive deal and priced its first negotiated issue in the muni market on Oct. 28, 2008, following its takeover of Lehman’s muni business at the end of September 2008.

This October, Barclays ranked fourth among muni senior managers for the month, with nearly $4.7 billion of debt in 22 issues that included a $3.4 billion California economic recovery bond refunding, according to Thomson Reuters data.

Barclays Capital, the investment banking unit of British bank Barclays Plc <BARC.L>, has closely matched the performance of Lehman, which dissolved in a bankruptcy filing last year. In the first nine months of 2009, Barclays ranked sixth among senior managers, with $18.2 billion of bonds in 123 deals.

CHICAGO (Reuters) – Voters in the U.S. states of Maine and Washington on Tuesday rejected measures to limit spending, while Ohio’s ailing economy swayed residents to approve casino gambling.

Meanwhile, voters okayed most of the estimated $10.5 billion of bonds on ballots in several states, according to Ipreo, a New York-based data company.

“Rejection of spending limits in Maine and Washington hint that voters may not be overly concerned with growth in government spending, despite a huge expansion in federal spending over the last year,” said a report by Ballotwatch, an election tracker based at the University of Southern California’s Initiative & Referendum Institute.

Ohio voters, after turning down casinos in previous elections, changed their minds as the state struggles with sinking revenue due to the economic recession. The measure, which passed with nearly 53 percent of the vote, allows casinos in Cincinnati, Cleveland, Columbus and Toledo.

CHICAGO (Reuters) – The U.S. economy’s return to growth during the third quarter shows stability has been regained but recovery is fragile and needs nurturing, Treasury Secretary Timothy Geithner said on Thursday.

The government estimated that gross domestic product grew at an annual rate of 3.5 percent from July through September. Still, Geithner said the government must be ready to reinforce growth if needed to avoid risks of a credit crunch.

In a one-hour question-and-answer session at the Economic Club of Chicago, Geithner said the United States can’t borrow-and-spend its way to health and pledged every effort to encourage an investment-led recovery.

“The (GDP) number today was really encouraging….it was broad and strong and it wasn’t just cash-for-clunkers and it wasn’t just economic stimulus…but it’s important to remember that it’s very early,” said Geithner.

CHICAGO, Oct 29 (Reuters) – The U.S. economy’s return to growth during the third quarter shows stability has been regained but recovery is fragile and needs nurturing, Treasury Secretary Timothy Geithner said on Thursday.

The government estimated that gross domestic product grew at an annual rate of 3.5 percent from July through September. Still, Geithner said the government must be ready to reinforce growth if needed to avoid risks of a credit crunch.

In a one-hour question-and-answer session at the Economic Club of Chicago, Geithner said the United States can’t borrow-and-spend its way to health and pledged every effort to encourage an investment-led recovery.

“The (GDP) number today was really encouraging….it was broad and strong and it wasn’t just cash-for-clunkers and it wasn’t just economic stimulus…but it’s important to remember that it’s very early,” said Geithner.

CHICAGO/NEW YORK (Reuters) – The Obama administration’s pay czar joked Wednesday that he might have to move to Pluto to escape the fallout from his first batch of compensation decisions, which are expected in October.

Kenneth Feinberg, a Washington lawyer appointed by President Barack Obama in June to decide on pay for the highest-paid employees of companies that received extraordinary government assistance, told a Chicago Bar Association event that he does not expect his rulings to be universally applauded.

“I’m not sure there will be any type of result here that is going to be praised …,” said Feinberg, who appeared via teleconference. “Likely, I’ll be criticized from both ends.”

He said he is meeting nonstop with Citigroup Inc, Bank of America Corp and American International Group Inc as he finalizes his first wave of compensation rulings. He has said he plans to report on his rulings in mid-October.

CHICAGO/NEW YORK, Sept 30 (Reuters) – The Obama administration’s pay czar joked Wednesday that he might have to move to Pluto to escape the fallout from his first batch of compensation decisions, which are expected in October.

Kenneth Feinberg, a Washington lawyer appointed by President Barack Obama in June to decide on pay for the highest-paid employees of companies that received extraordinary government assistance, told a Chicago Bar Association event that he does not expect his rulings to be universally applauded.

“I’m not sure there will be any type of result here that is going to be praised …,” said Feinberg, who appeared via teleconference. “Likely, I’ll be criticized from both ends.”

He said he is meeting nonstop with Citigroup Inc <C.N>, Bank of America Corp <BAC.N> and American International Group Inc <AIG.N> as he finalizes his first wave of compensation rulings. He has said he plans to report on his rulings in mid-October.