Tuesday, March 30, 2010

The Bailout Bus Keeps Rolling......

Looking into the PMI Investor Presentation & MGIC Investor Presentation and their "sky high" ( not just a few billions.... ) in exposure it should be clear that this is also another "hidden" bailout for the banks......The knowledge that the "Bailout Bus" keeps on rolling might explain Cramer´s Bull Case For Banks.... Even if he wasn´t honest enough to mention the "moral hazard trade" in his 10 reason to rush into the banking sector.....;-)

Ein Blick in die PMI Investor Präsentation & MGIC Investor Präsentation die einen "astronomisch" hohen Betrag ( rede nicht nur von einigen Mrd... ) an versicherten Schadensfällen ausweisen genügt um zu erkennen das hier neben den PMI Aktionären und Anleihebesitzern vor allem die Banken begünstigt werden die seinerzeit die Versicherung gezeichnet haben......Genau diese Bailoutgarantie erklärt auch Cramer´s Bull Case For Banks... Schade nur das er nicht so ehrlich gewesen ist den "Moral Hazard Trade" unter den 10 Kaufaurgumenten in Sachen Banken aufgeführt hat.... ;-)

H/T Matson

Insuring Against an End to Moral Hazard WSJ
The bailout bus keeps rolling. Last week's programs to forgive mortgage principal were good news for mortgage insurers. But PMI Group's share-price surge had an extra lift from Freddie Mac.

The mortgage giant gave a new PMI subsidiary the green light to write insurance for loans that Freddie guarantees. PMI needed the blessing—and got a similar one from Fannie Mae—because its main subsidiary may be banned in some states from writing policies if it breaches regulatory capital rules.

If that happened, PMI's future would be in even greater doubt. The company lost nearly $1.6 billion over the past two years and warned that "as a result of continued losses, we will need to raise significant additional capital and/or achieve significant statutory regulatory relief."

What is curious is that Freddie's and Fannie's support potentially puts taxpayer dollars at risk, while helping PMI shareholders—the company's stock jumped more than 40% last week. The moves also come as debate continues over how much skin in the game homeowners should have.

Help for PMI, and for Mortgage Guaranty Insurance Corp. last month, is also notable because Freddie has suggested that firms like this mightn't be able to meet future claims.

Freddie in its annual filing said "some of our mortgage insurers lack sufficient ability to fully meet all of their expected lifetime claims-paying obligations to us as they emerge." PMI has the lowest credit rating of Freddie's rated mortgage-insurance counterparties.

With the government, through Fannie and Freddie, willing to play such games to keep small fry like PMI and MGIC alive, it shows quite how far away Uncle Sam is from a real solution on "too big to fail."

See also As GSE Delinquencies Hit All Time Highs, What About The Monolines? ZH

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