The credit crisis has created historical levels of uncertainty for banks, mortgage companies and brokerage firms. There have been unprecedented losses in the sector with some companies going out of business completely (IndyMac) or merging with larger banks out of sheer necessity (Bear Stearns). For more of my past insights into the beaten down banking sector, don’t miss “Lehman Brothers (LEH) Share Price Smack Down.”

Yesterday, it was AIG’s turn at the whipping post as the company reported massive losses with a high probability of more to come. Without a doubt, AIG is a name to avoid despite its current low stock price (see, “AIG’s House of Falling Cards“).

But believe it or not, there will be credit crunch survivors that will not only survive–but thrive.

I’ve already gone on record as saying that certain banks like Wells Fargo (see “Wells Fargo (WFC) Turning the Tide“) and Wachovia (see “Wachovia’s Steel Resolve” ) can be expected to still be standing once all of the dust settles.

Today, I’m ready to add yet another name to the list of falling knives worthy of our speculation: MBIA (MBI).

Rising From the Ashes

The large bond insurer announced that its quarter profit (yes I said “profit”) increased due a recognized gain on the value of its credit derivatives. Interestingly, it was AIG that recognized a large loss on credit derivatives yesterday which goes to show that there are two sides to every trade.

Indeed, there are winners and there are losers.

Earlier this year, the speculation was that the bond insurers would be crippled by the credit crisis. In fact, MBI was devastated by the loss of its highly coveted AAA rating by Standard & Poor’s, making it difficult for the company to underwrite new insurance business.

Enter stage right the “Oracle of Omaha” and his cash-laden Berkshire Hathaway (BRK-B) which opened up Berkshire Hathaway Assurance to direct competitor with MBI in the bond insurer market.

With all the negativity, investors punished MBI by selling shares hard. In October of last year MBI was worth more than $60 per share. Before today’s news shares were worth about $8.25.

Still on the Radar

However, the stock is up today, but just a tad. Is it a blip or the beginning of a new uptrend? How do we really know? We don’t, but there are some positive signs.

The biggest for me is that there appears to be little worry about MBI’s balance sheet. There are no indications that the company will need to dilute shares by raising capital. Another positive sign is that the company is looking to buy back stock.

Now I can appreciate that corporate managers have a bad rap, but in this case, I think we can gain some comfort from its statement today regarding share buybacks. I would also take comfort in the planning for the worst case scenario. The homebuilding sector is still in shambles, and yet MBI does not seem to be surprised by the condition of the market.

As a Rational Investor it is our job to take advantage of these situations by identifying the companies that will rise from the ashes. If you are a gambler with a constructive view on the market, MBI might just be the stock for you.

This article was written by Jamie Dlugosch, editor, InvestorPlace.com. For more actionable insights likes this, go to: www.InvestorPlace.com.