I think many regional banks have Municipal Bonds as an investment which traditionally had been a "safe investment", however the major Bond Insurers appear to not have enough reserves to cover the trillions of CDO's and SIV's that are being written off as worthless.

It's predicted that bond insurers will be down-graded due to this lack of reserves which will cause a "equal" downgrade of bonds including Muni's in their portfolios. As soon as this occurs, all financial firms including banks that have these investments will need to "write-down" the value of their bonds.

Doesn't look good. Hope I'm misinformed.