This could be a good bank/bad bank plan like one that was used to bail out lousy banks in the late 1980s. Mellon Financial, which had enormous problems with bad real estate loans to developers in Texas, Colorado and Louisiana, trying to take advantage of the early 1980s oil boom, used this approach. This means that Mellon agreed to accept a few cents on the dollar on a bad loan to be rid of it, instead of waiting years to collect a little more.

This good bank/bad bank strategy allowed Mellon, as the "good" bank, to keep its performing loans, and sweep away $1.4 billion in troubled loans by selling them to a "bad" bank called Grant Street National Bank. The sale cut Mellon's nonperforming asset ratio to 5.03% at the end of 1988 from its 8.01% peak in 1987, when there were rumors that it would fail. And five years later, Mellon had executed a shift into fee-based businesses which enabled it to survive and prosper. But the loans at Grant Street remained a drag on Mellon's performance. And it ultimately merged with Bank of New York.

I don't know whether the Ambac bailout plan will involve a similar structure. If it does, such a structure could provide the breathing room Ambac needs to recover. But there remain many questions:

• How much will Ambac need to keep in reserve to pay the claims on broken MBSs and the other asset-backed securities it guaranteed?
• Where will the capital come from to pay those guarantees?
• How much capital will the banks need to raise in order to preserve their capital ratios should Ambac and the others lose their AAA ratings?
• If the banks are somehow behind this plan, do they have the capital needed to back it?
• Is that capital commitment less than the amount they'd need to raise if their asset-backed securities need to be written down further?

Ultimately, the question becomes whether the Ambac rescue plan really solves the problem or just delays the ultimate reckoning. We'll likely find out more this week.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He owns Citigroup stock and has no financial interest in the other securities mentioned.