Wednesday, October 24, 2007
Since Citigroup, Bank of America and JPMorgan Chase announced, with great fanfare, its "rescue plan" for SIVs (structured investment vehicles), they have not released much information about how the plan would work or where the rescue funds would come from. Indeed, some have said the plan is just window-dressing. Meanwhile, the SIVs need to find investors for about $100 billion in debt coming due soon. SIVs sell short-term debt and use the proceeds to buy longer-term, higher-yielding securities. They are a popular investment vehicle for money market funds and municipalities that viewed SIVs as loss-risk investments. In the wake of the credit crunch, however, SIVs have had difficulty selling the debt, and much of their approximately $350 billion in assets is backed by U.S. mortgages. WSJ, SIV Situation:Will RescuersArrive in Time?