ACA Capital, a bond insurer hammered by mortgage defaults and partly owned by Bear Stearns, said yesterday it has agreed to not pay dividends or pledge assets without the permission of the Maryland Insurance Administration. This is the latest domino in the mortgage debacle. First the homeowner defaults, then the mortgage bonds go bad, then the bank that owns the mortgage bonds has a crisis, and then the bond insurer has its own crisis. Then the bank that depended on the bond insurance to limit its losses has a crisis. From Gretchen Morgenson's and Vikas Bajaj's recent story in the New York Times.

It also means that the major banks that insured their securities with ACA Financial Guaranty might have to take back billions in losses from the insurer under the terms of the credit protection they bought from the company.

The troubles at ACA could also serve as the first real test for credit default swaps, the tradable insurance contracts used by investors to protect, or hedge, against default on bonds. In June, the value of bonds underlying credit default swaps rose to $42.6 trillion, up from just $6.4 trillion at the end of 2004, according to the Bank for International Settlements.

''The hedge is only as good as the counterparty, or the other party, to the hedge,'' said Joseph Mason, a finance professor at Drexel University and the University of Pennsylvania. ''This is part and parcel of the financial innovation that has grown very rapidly in recent years.''

Canadian Imperial Bank of Commerce said Wednesday that there was a ''reasonably high probability'' that it would incur a ''large charge'' in its first-quarter results because of its exposure to ACA Capital, Reuters reported.

Turmoil at ACA Capital has been evident for a few months. In a filing last month, the company said it wrote down the value of its swaps contracts by $1.7 billion and reported a negative net worth of $883 million, about $25 a share. The merchant banking affiliate of Bear Stearns owns 29 percent of ACA Capital. The company also insures municipal bonds and manages collateralized debt obligations, pools of assets like mortgages and other loans.