JPMorgan: SIVs have No Business Purpose
Submitted by
CalculatedRisk on Tue, 11/13/2007 - 11:05am (56 comments)
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SIVs don't have no business purpose.
Sure they do, to make fees.
Sure, they do. They allow for circumventing capital requirements.
And they will help to expose the banks that have taken on too much risk to the resulting consequences.
Yep, fees and a way to offload bad paper, that's about it.
Yes, but you can't be quoted as saying "SIVs have no business purpose except to rake in fees and evade capital requirements."
tanta, was there a remittance report today that showed everyone is now current or did the ABX suddenly reverse course? What the hell is driving this insanity?
Aw c'mon folks SIV's may pawn as many bad jokes as michael jackson.Does anyone know when "SIV Positive" was first used? I am sure it was around prior to the last few weeks,but do not recall when i first saw or used it.
Sure they do, to allow well-connected businessmen to bail out of bad investments.
LOL...
What the King said when he finally realized he was buck naked.
I get so riled up reading about how a group of bankers at Citi "invented" the SIV structure in the late 80's and how "integral" they are to the world's economy today. Hello!!! A SIV is nothing more than borrowing short and lending long taken an illogical extreme. It's not revolutionary, it's banking 101.
SIVs don't have a business purpose.
If businesses are run for shareholders, then no, they don't. If businesses are run for management, then yes they do.
This is probably not the right thread but I thought you all would enjoy seeing this.
When I logged into my e-trade bank account today this message was up. How they construe their sub-prime mess as "market conditions" is beyond me. Sounds like grasping at straws.
To all E*TRADE FINANCIAL customers:
November 12, 2007
This is a challenging time for the financial services industry. Bad news in the credit, housing, and stock markets continues to dominate and E*TRADE is not immune to these market conditions.
However, you, our customers, should know that we continue to be well capitalized by regulatory standards. As a matter of fact, we could absorb an immediate write down in excess of $1 billion and still remain well capitalized. Nobody knows for certain what the ultimate impact will be from these markets, but it is our expectation that news in the market will get worse before it gets better and, armed with these expectations, we are taking prudent measures to effectively manage the company's balance sheet.
We will continue to earn your confidence, providing state-of-the-art asset protection, including ETRADE's Complete Protection Guarantee, SIPC Protection for ETRADE Securities customers and FDIC Insurance for E*TRADE Bank customers.
We appreciate the opportunity to continue to serve you and your investing needs.
Jarrett Lilien
Jarrett Lilien
President, COO and Director, E*TRADE FINANCIAL
My vote for Quote of the Day:
``As we said at the end of the third quarter, we continue to be net short in these markets [MBS & CDO]'' - Blankfein Chief Executive Officer Goldman Sachs.
Could someone on the floor please pick up my jaw? Never mind, it'll just fall again when I finish reading that he says GS essentially has no Level 3 assets because "his firm has ``a pretty good grip'' on the valuation of its so-called Level 3 assets, which are the most difficult to value." Besides Cramer thinks GS is a screaming buy.
Robert- "Besides Cramer thinks GS is a screaming buy."
We all know Cramer is a shill
"We are confident that we know how to evaluate these assets," Blankfein said.
The thing is, he might be right. As nice as it would be to see the "smartest guys in the room" (i.e. Goldman) get their comeuppance, I have a feeling it's not going to happen.
Cramer may be a shill, but I sure would not bet against GS.
Citi could have saved itself a lot of trouble if they had made Jamie Dimon CEO when they had the chance.
here's fitch on what's wrong with The Best Vintage Ever!:
http://fitchratings.com/corporate/events/press_releases_detail.cfm?pr_id=382934§or_flag=3&marketsector=2&detail=
Jim Cramer thinks he's one of the predators but he's just a bellwether.
Note: bellwether has come to mean a leading indicator of future trends but I also use the term in its historical and real-world sense -- a castrated ram wearing a bell collar whose job is to lead a sheep herd, to pasture, shearing or slaughter.
Goldman would have had to flip an aweful lot of bets, awefully early in the game....and give up some last push $$$$ to get ahead of this mess.
Given the short term thinking that is pervasive on Wall Street...it's highly UNLIKELY that they made that choice.
My guess is that they are going to stall reporting anything as long as possible, hoping that the selling prices for all of their own level 3 crap will rise.
I'm trying to figure out what is responsible for my screen having every issue pegged green.
Surprise emergency rate today after the close, that no one knows about yet but the President's working group is putting the finishing touches on?
here's the actual report also:
http://fitchratings.com/corporate/reports/report_frame.cfm?rpt_id=353344§or_flag=3&marketsector=2&detail=
Isn't "don't have a business purpose," close to the IRS's definition of an abusive tax shelter?
Hey but why worry? The stock market is way up ("rebounded" to be precise) today. So who cares about mortgages and houses, except people who can't pay them or lose them, and they don't have enough clout to bring down the economy. The rest of us just sail along without a care in the world. Or at least, not many cares.
Cramer may be a shill, but I sure would not bet against GS.
Especially when the US government works for them.
Tom Stone, someone surely beat me to the punch somewhere, but I first used the term here on 10/21.
I'm trying to figure out what is responsible for my screen having every issue pegged green.
Surprise emergency rate today after the close, that no one knows about yet but the President's working group is putting the finishing touches on?
barely | 11.13.07 - 2:52 pm | #
If this actually happens, I will start proudly wearing my tin foil hat outdoors.
I'm trying to figure out what is responsible for my screen having every issue pegged green.
Surprise emergency rate today after the close, that no one knows about yet but the President's working group is putting the finishing touches on?
To be perfectly honest, if you're shorting stocks and you don't welcome days like today, you're probably not managing your portfolio properly.
Just as someone who's genuinely bullish welcomes dips as buying opportunities, somebody who's bearish should very much welome days like today -- especially if the root cause is a short squeeze.
Bearish positions should have no problems on days like today unless they've been overly aggresive.
And if you think this is bad, just wait until we get up to DOW 20,000 in a couple of weeks.
The home sales index being slightly up in Sep vs Aug aint gonna slow this bull train down either.... Dow may finish up 400+ today.
duuuh.
Wal-Mart beat estimates & oil "dipped"
Flat screens for everybody!
yipeeeeee!
tanta, was there a remittance report today that showed everyone is now current or did the ABX suddenly reverse course?
I know you're kidding, but just so everyone knows: remittance reports don't come out until around the 25th of every month.
Anon,
Let's see it peg 300 first - and take a gander at new highs/new lows - but who knows where the next stop is, not me (or you either lol!).
My guess is that they are going to stall reporting anything as long as possible, hoping that the selling prices for all of their own level 3 crap will rise.
Kp | 11.13.07 - 2:50 pm | #
Kp,
I'm thinking the same. Just like those deep in debt floating checks to go to the casino "win back their money", I believe GS is laying a bluff hoping they never get called. If that is the case, we will end up seeing their hand because all of the other meltdowns will mandate it.
But they sure serve criminal intent
Isn't "don't have a business purpose," close to the IRS's definition of an abusive tax shelter?
jim a | 11.13.07 - 2:57 pm | #
This is exactly what I was wondering. I thought that phrase had a regulatory meaning of some sort (I couldn't recall whether tax / accounting / reserves / "other fiscal stuff"
). So I wondered if this weren't JPM's attempt to make someone else's life difficult in some way.
A few of us saw this set-up with the yen top/$bottom on sunday night...
arbo's been on this dynamic for the better part of the year...
A few of us saw this set-up with the yen top/$bottom on sunday night...
arbo's been on this dynamic for the better part of the year...
there's been quiet building in the financials for week as well, even as prices broadly fell.
the question is: will it have any legs? or is it just a dead cat? and if it's a dead cat (and you're a trader), will it reverse tomorrow or next week?
but the bigger picture is totally unchanged, imo. the market will go south. a dedicated and unlevered short can just sit through stuff like this and sip cool drinks while reading a good book.
Setup indeed. I predict the QQQQ's will be pinned at 51 Friday. Anyone got the over or under, or care to make a prediction on another index?
HSBC bank IS NEXT TO JOIN THE BANKERS GRAVEYARD,,,Some damaging information on HSBC is due out shortly,,shitloads of subprime on the books,,,wow wow wo wo woshhhhhhhhh
Now he tells us. Where was he years ago?
You might get one more day out of this, but once retail sales are announced, it's back to talk of the 3 Rs - recession, rate cuts and risk aversion.
Cramer may be a shill, but I sure would not bet against GS.
People said that same thing in 1929, too.
Research their history and see.
What, 40 comments and not one mention of the PPT? You guys are slipping...
"I'm thinking the same. Just like those deep in debt floating checks to go to the casino "win back their money", I believe GS is laying a bluff hoping they never get called. If that is the case, we will end up seeing their hand because all of the other meltdowns will mandate it."
Or maybe for once, there's actually 1 firm out there at actually predicted a severe housing market downturn and hedged well against it??? Is it hard to imagine 1 out of (10?) players in the market making the right call?
To quote from 'Groucho and Me', in the chapter titled "How I Starred in the Follies of 1929"
But Goldman-Sachs at $150? At the bottom of the market it could be snapped up for one dollar a share!
Too good to be true? Without doubt!!
I think the idea that Goldman is "bluffing" is really unlikely. The risk/reward is all wrong for that sort of play. Everyone else is taking a hit, we can do so and not really get punished or we fake it, the stock runs a few percent, and if it doesn't work, a whole bunch of us lose our jobs. Lousy trade.
Mayor Quimby is speaking right now:
From now on, this day shall be known as 'PPT Day'.
What are the odds of nailing a top perfectly...I'd argue it's a hell of a lot less than 1/10.
And on the point of Goldman being the "smartest guys in the room"...consider the relative aspect of that comment. Being a 110 in a room full 100's isn't really something to brag about.
"if it doesn't work, a whole bunch of us lose our jobs. Lousy trade"
Well, faking it worked for Countrywide.
Oops I forgot, sounds like MLEC is dead in Jamie's mind huh?
I'm sure Mr. Dimon will take his millions anyway, even though JP Morgan seems to serve no business purpose either other than tying up my mom's estate for the last four years.
<i>To all E*TRADE FINANCIAL customers
RUN NOW!
:</i>
SIVs don't have no business purpose.
heh...
Banker: faking it allows Goldman workers to get all those bonus dollars stored away for them. Once they are distributed, you can't get them back. With that said, maybe GS is in fact clean; if they kept to the transport rather than the storage business, which is what everyone was supposed to do in the first place, then they should in fact be ok.
And let's not forget half the other governments in the world. But GS can screw up; they did big time with the Treasury and the Bund in the early 90s.
GS may in fact be clean, but from Forbes early this year:
Goldman has to stay out ahead of its rivals in trying daring and innovative approaches that push the outer edge of the boundry between what is ok and what may not be. Blankfein tells Goldman folks that the job of compliance lawyers is to tell them where the edge is - because otherwise, "we'd stay in bed with a blanket over our heads" and not try anything.
Now go do a Google search for Goldman and Midway Airport in Chicago, or for Goldman and fraud, or for Goldman and indictment. You'll find that they are exceedingly good at what Blankfeim says in that Forbes article...pushing the envelope. They are so good at pushing it that they break the law and periodically get nailed for it. Their PR department and political connections however do a superb job of keeping it out of the public eye. They may win, but I'd hardly call them HONEST.
Where was he when his firm was using SIVs?
Oh, wait, they still do.
As long as their is credit arbitrage, there will be SIVs.