For those on Wall Street who asked “What is Warburg Pincus thinking?” when the firm announced a $1 billion investment into embattled bond insurer MBIA, that question got a lot more pertinent on Thursday.

Warburg’s deal was announced last week, when MBIA’s shares were getting slaughtered on its exposure to CDOs and subprime mortgage assets.

Then on Thursday, MBIA came out with a doozy: The world’s largest bond insurer said its exposure to CDOs, in fact, was a whooping $30.6 billion — an amount bigger than its entire net worth.

MBIA’s stock dropped another 27 percent — no surprise there, given the scope of the exposure. Its shares are now down more than 70 percent this year.

But from a private equity standpoint, the questions abound about Warburg’s investment plan in MBIA. Did Warburg know about this exposure at the time of the deal? Can it back out of the offer? Didn’t they listen to Bill Ackman’s detailed presentation a few weeks ago on his compelling thesis that certain bond insurers, namely MBIA, will essentially be bankrupt by early next year? Warburg declined to comment on Thursday.

Deal Journal points out that so far, on paper, Warburg is losing $20 million a day on its MBIA agreement.

Granted, the key word there being paper, as the deal hasn’t closed yet so nothing’s really been bought or sold yet.

But let’s give Warburg the benefit of the doubt here for a minute. The firm is well respected across Wall Street, and it’s not your average private equity shop. In addition to large-scale buyouts like the big guys, Warburg does venture-style investing, growth investing, recaps and other non-traditional deals. So of all the big buyout shops out there, Warburg may be the one most likely to sit on this investment for a while, assuming that when the deal does close in January-ish, they’ll be buying at the bottom.

Looking at MBIA’s financials and its stock performance lately, that doesn’t exactly seem like a safe bet.