Radian: What Are You Still Doing Here?

Radian Group (NYSE:RDN) reported a profit this quarter mostly on the back of insurance claims recinded due to misrepresentations. American International Group (NYSE:AIG) is up big on the news, as are other insurers. It might explain MBIA’s (NYSE:MBI) big move to the upside yesterday.

Here’s something a bit odd, though. Why are all the other banks up on this news. It isn’t like foreclosures are down. In fact, what Radian is saying is that they’ve managed to avoid paying banks the insurance they were otherwise do. How is this good?

Isn’t Radian just transfering losses from their own books onto other banks? Won’t the other MI’s follow suit? Even the more conservative banks, e.g., JPMorgan Chase (NYSE:JPM) or Wells Fargo (NYSE:WFC) have exposure to potentially “misrepresented” loans through their recent acquisitions. I suppose banks would rather Radian (and the other MIs) survive in some form. But even then, I’d have to say this is at best, a mixed event for banks. Not a clear positive.

The other day I wrote a fairly positive view of the housing market, but I reiterate, banks remain very vulnerable. I think the systemically important banks will survive, but I think there are lots more failures to come. Feels like the market is losing sight of this.

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