Ambac's shares rise as it outlines aid proposal

NEW YORK (Reuters) - Shares of Ambac Financial Group Inc (ABK.N) rose on Wednesday after the company said it had devised a federal proposal that could stabilize its sector, and have a positive impact on the wider U.S. economy.

Ambac put forth a two-part federal guarantee program that it said would cover losses above a certain point, and guarantee existing securities.

In a statement, the No. 2 U.S. bond insurer said its plan was designed "to address issues that cannot be efficiently addressed" by a program that allows government to take stakes in financial institutions.

In addition, it would minimize "credit risk to the U.S. taxpayer," said Ambac.

Beneficiaries could include states and municipalities, banks, investors, consumers, and securities issuers, said the company.

Both Ambac and its larger rival MBIA Inc (MBI.N) have been meeting with regulators to push for access to federal aid under government's $700-billion rescue plan for financial institutions.

Ambac shares were 9.7 percent higher to $2.49 in afternoon trading on the New York Stock Exchange, while MBIA shares were up 11.6 percent to $7.99.

(Reporting by Lilla Zuill; Editing by Tim Dobbyn)