Don't Ignore the Mortgage Insurers

Round up the usual suspects:

• Radian (RDN - commentary - Cramer's Take)
• MBIA (MBI - commentary - Cramer's Take)
• MGIC (MTG - commentary - Cramer's Take)
• Ambac (ABK - commentary - Cramer's Take)
• PMI (PMI - commentary - Cramer's Take)

Throw in walking dead ACA Capital (ACA - commentary - Cramer's Take) and Security Capital (SCA - commentary - Cramer's Take), and I think you produce what is really wrong with this market.

Anybody who takes even a casual look at the October delinquencies knows that these companies are going to be severely capital-challenged. Meanwhile, value guys like Third Avenue Management (Radian) and fellow travelers (Old Republic and PMI) make Pyrrhic stands and engender short squeezes that are mistakenly not used to recapitalize. And outfits from E*Trade (ETFC - commentary - Cramer's Take) to Fannie Mae (FNM - commentary - Cramer's Take) are left holding the bag on this stuff.

It is the insurers that seem to be ignored -- still -- as the Achilles' heel that will make it so that so many institutions have to regard junk as nonperforming. The perfect soggy chain of Moody's and Standard & Poor's rating these firms in turn gives Moody's and S&P the right to rate so many stupid structured products as AAA and AA, and that holds the linchpin to the next move down.

Of course, Washington Mutual (WM - commentary - Cramer's Take) and Countrywide (CFC - commentary - Cramer's Take) would suffer greatly from these insurers' downgrades as it would virtually shut off any ability to grow out of the problems or take advantage of the giant spreads that are developing.

Somehow I think this whole fragile scenario is just too opaque for the Fed to understand.

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Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS. Watch Cramer on "Mad Money" weeknights on CNBC. Click here to order Cramer's latest book, "Mad Money: Watch TV, Get Rich," click here to order his book, "Real Money: Sane Investing in an Insane World," click here to get his second book, "You Got Screwed!" and click here to order Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column by clicking here.

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