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The blogger Accrued Interest isn't buying into the euphoria over U.S. financial stocks after Wednesday remarkable surge by some of the more beaten up names. Recall that Radian Group Inc. posted a surprise quarterly profit, raising the possibility that other troubled U.S. insurers might post similar positive surprises. AIG's shares have risen 92 per cent in two days.

Here's Accrued Interest's take:

"Radian reported a profit this quarter mostly on the back of insurance claims rescinded due to misrepresentations. AIG is up big on the news, as are other insurers. It might explain MBIA's big move to the upside [on Tuesday]

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"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 due. 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., J.P. Morgan or Wells Fargo 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."

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About the Author
Investing Reporter

David Berman has been writing about business and investing since 1995. He has written for a number of magazines, including Canadian Business and MoneySense. He worked at the Financial Post as an investing writer and daily columnist before moving to the Globe and Mail in 2008. More

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