Prospects of another downturn in the credit crisis continued to increase, this time on an old standby: a credit-ratings firm threatening to downgrade the bond-insurance companies.

Moody’s Investor Service said it is “most likely” going to downgrade MBIA and Ambac Financial because they’re having trouble ginning up new business, Bloomberg says. Any lowering of their AAA ratings would cause another wave of tens of billions of dollars of losses on Wall Street and elsewhere as banks would be forced to write down the value of more than a trillion dollars in assets that aren’t insured as well as had been supposed.

The Wall Street Journal says on its Money & Investing front that “the relative calm that has prevailed over credit markets since mid-March… shows signs of dissipating” with junk-bond rates up again, default-insurance costs rising and the costs of bank-to-bank loans still high.

But the Financial Times says that the downgrades don’t seem quite as threatening to the financial system as they did three or four months ago.

Since then, many banks have reduced exposure or made provisions for losses. “As time drags on, financials are more able to take precautionary measures,” said Ciaran O’Hagan, head of fixed income strategy at Société Générale. “So what once seemed like the end of the financial industry a few months ago now barely registers as a blip.”

The whole dance between the credit-ratings firms and the bond insurers over the last several months has been bizarre. The bond insurers have been forced to raise capital to cover impending losses, but markets don’t believe it will much matter and the two companies’—the biggest in the industry— stocks are down more than 90 percent in a year, while the cost of insuring them against default is enormous—and implies their debt is the junkiest of junk—not top-notch AAA as Moody’s and Standard & Poor’s say it is. Fitch Ratings already has downgraded MBIA and Ambac.

The bond insurers’ entire raison d’etre is based on their AAA credit rating, as Reuters helpfully notes, and a downgrade would “effectively” put them out of business.

The stock market fell for the fourth straight day on renewed credit worries.

Verizon behemoth on horizon

The papers say Verizon Wireless is discussing a $27 billion bid for cell phone company Alltel, while Bloomberg this morning reports that France Telecom is offering $42 billion for Swedish phone company TeliaSonera.

An Alltel deal would come just seven months after the company’s leverage buyout by TPG Capital and Goldman Sachs for $27.5 billion. The Journal on page one says the “possible rapid resale is a powerful sign of how the credit crunch is roiling the business world.” It says the banks that funded the acquisition—including Goldman—are still holding some $20 billion of debt from the transaction that they can’t get rid of, and the value of the debt has been about 89 cents on the dollar, though it shot higher yesterday on news of the possible deal.

The New York Times on C1 says it would be “one of the quickest flips in corporate history,” and is being driven by the lenders not being able to sell the debt. They’d have to take a small hit on their loans, it and Bloomberg say. TPG has been buying back the debt from its lenders at a discount and would make money by selling it for more, the WSJ writes.

The FT embarrassingly misses the credit-crisis angle completely.

Everyone says a Verizon/Alltel deal would create the biggest cell phone company in the country, helping the two compete better with AT&T.

The new homesteaders

The NYT posts an interesting story on A1 about hedge funds and other big investors that are placing big bets on agriculture—and not via commodities markets or other ways they’ve traditionally invested. More of them are getting into farming markets directly, “by buying farmland, fertilizer, grain elevators and shipping equipment.”

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu.