ACA Financial, run out of New York but registered in Maryland, has rocketed to stardom as an example of how not to manage credit risk. The bond insurer guaranteed a lot of subprime paper and other financial garbage that has Wall Street gagging these days. It is not in receivership, but its affairs are under the control of the Maryland Insurance Administration. Today the Board of Public Works approved another $1.2 million to continue MIA's investigation into ACA. From the agenda:

After almost three months of an in-depth investigation of ACA Financial Guaranty Corporation (ACA) insurance company, Bingham McCutcheon LLP is still finding information and reporting that information to the Administration. The need for this investigation still exists and the contract needs to continue. Additionally, the restructuring efforts could take many more months, and if ACA is placed into receivership, it could take years to wind up the affairs of ACA, which would mean the possibility of additional modifications to the contract.

ACA pays the $1.2 million to Bingham McCucheon, the law firm combing through its books. But apparently it's a state contract and Public Works has to approve it. Banking companies such as Citi, UBS, Merrill Lynch and Wachovia reportedly have billions in exposure to ACA. So far ACA has signed three "forbearance" deals in which its creditors temporarily agreed not to press claims. Forbearance No. 3 runs out April 23.