What this all means is that if the GSEs are forbearing in making claims on their PMI policies, it not only hides the GSEs’ losses. It also means we’re seeing another quiet bailout of the banks.

Leviting further says the banks get reinsurance business as a sort of kickback from PMI companies:

The lender selects the PMI carrier based on the amount of business the PMI firm will cede to the lender’s captive reinsurance subsidiary. And therein lies a regulatory capital game, as captive reinsurers aren’t required to hold much regulatory capital at all, as there is jurisdictional competition for charters.

Needless to say, we need more reporting here.

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu.