MAKORisk

Four Reasons Radian Group Is Headed Higher

2 points. Point 1: RDN's financial guaranty biz is in runoff, with the hope that its healthy (no ugly, ABK-like exposures) cashflow will suffice to fund rising losses in core mortgage guaranty biz. But FG is regulated insurance co. in NYS, and Ins. Dept. will be very grudging about allowing cash to be upstreamed, Result is unpredictable race between mortgage insurance losses and financial guaranty dividends. Point 2. Mortgagor relief measures are two-edged for mortgage insurers. They will reduce risk of defaults (and therefore losses) on existing exposures, but by same token they reduce/eliminate need for insurance. Since insurance premium is typically addon to mortgagors' monthly debt service payments, result may be to cut off insurance and therefore revenue flows to insurers. Again, result may be unpredictable race between freeing up capital vs claims on (worst/riskiest) risks that remain.

FBI Investigates Victims of the Financial Fallout

I agree completely with succinct litany of the blameworthy. However, I can't agree that the shareholders are innocent victims. Unfortunately, in our system, the shareholders are deemed to be in control of the corporation through their representatives on the board. Anyone with any smarts/sophistication knew long ago that housing was bubbling, that underwriting & documentation were getting sketchy, that appraisal fraud was rampany, that "Alt-A" was a black hole . . . and that credit quality spreads would inevitably gap back out. The boards of AIG, ABK are chargeable with that knowledge, yet they allowed their managers to load the boat with highly leveraged exposures to mortgage risk via synthetic multi-sector CDOs. And in AIG's case inexplicably also promoted the boat-loading by permitting the trades to be supported with collateral obligations. The results should not be surprising, but still the shareholders have not thrown the rascals out.