Several banks are forming a consortium to make a market for SIVs. Citigroup holds about 100 billion dollars worth. Coincidently this is about the amount this group is going to raise. These instruments are a little like intestinal gas. It reminds me of the two immigrants, new to the US, taking notice of several balloons tied to an outhouse door. The one remarks to the other, “I’ve heard them, and smelled them, but this is the first time I have seen one!”
To keep the discussion polite, Citi/Shiti has some balloons for sale. They are rated as Chiti. I know we haven’t lost the short bus group, they all know the “Pull my finger drill.”
Needless to say, where does the 100 billion come from to make the SIVs fungible? The answer is so obvious that it boggles the mind, BAT GUANO FUTURES (Just Kidding). But the people out there that everyone is listening to, expecting a solution from, are part of a certified circus act.
Let’s see, you are a bank and you lost 100 billion dollars. The total cost to tax payers for the S & L fiasco of the 1990’s was only 125 billion. We have one bank with a very bad cough and more obligations on debt than the previous banking brouhaha in total.
What’s a 100 billion? The answer depends on who you ask. The one question not asked, is what bank can survive a 100 billion dollar loss? In my opinion, none. Citigroup is toast.