A state court on Wednesday allowed the Wisconsin insurance commissioner to proceed with his plan to allow bond insurer Ambac Assurance Corp. to imminently settle claims owed to major banks on structured finance product transactions.

Critics say the decision will give those policyholders preferential treatment and could leave the insurer without adequate capital to pay other claims. The judge, however, said tearing up the contracts at a fraction of their original value would help stabilize the company and benefit all policyholders.

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