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Well thats another fine idea by Paulson. He really did have a fine idea. Hopefully Hope Floats will have the same fate.
Apologies to Paul Simon
Whoah Ben only knows, Ben makes his plan
The informations unavailable to the moral man
Were workin our jobs, collect our pay
Believe were gliding down the highway, when in fact we're slip sliding away
OT but semi relevant article on Bloomberg. Paulson as a lame duck losing clout in China. I thought you had to have something before you lost it.
I wouldn't be surprised if Citi's new CEO Vikram Pandit decides to pull out of the SuperSIV and move what remains of the Citi SIVs to their balance sheet.
How much are C and the other big banks on the hook for? Do we even know how much their liabilities amount to?
The idea of a Super SIV still makes zero sense to me. You take a bunch of worthless loans and pool them all together and...somehow that makes the worthless loans worth something?
Hey, I know I'm not the smartest guy in the world but that doesn't add up.
Banks May Pool Billions To Avert Securities Sell-Off - NY Times
Citigroup, Bank of America and JPMorgan Chase, along with several other financial institutions, have been meeting to come up with a plan to create a fund that could prevent a sharp sell-off in securities owned by bank-affiliated investment vehicles.
How, exactly, would a fund like this prevent a firesale? Aren't they just rearranging stacks of paper without adding value to the paper?
Excuse my ignorance but I still don't get this.
It's no longer a Super SIV but a "very special" SIV.
It's melting away.
just when all those arms are freezing.
DebtX Loan Sale Platform Selected by FDIC for next five years to sell assets in FDIC receiverships
http://www.earthtimes.org/articles/show/news_press_release,240014.shtml
Turmoil shows up Basel II model weaknesses, says FDIC's Bair
404 Not Found
Citi's Arab investors have deep pockets, it is precisely those types of relationships which will be key to some banks survival going forward. What I fear is that if Citi does manage to find its sea legs, with help from the M.E. or whomever, will they be smart enough to batten down the hatches for awhile, or will they throw caution to the wind as the have in the past?
Huh? That's only $10 B from each of the major players. And they've already been taking those $10 B hits. Only conclusion: they found a new hiding place for this stuff.
"You can't turn a financial toad into a prince by kissing it or by securitizing it or by transferring its ownership to somebody else. If there's problems with an instrument, there's problems with an instrument."
- Warren Buffet
MORTGAGE MELTDOWN / Interest rate 'freeze' - the real story is fraud / Bankers pay lip service to families while scurrying to avert suits, prison
The sole goal of the freeze is to prevent owners of mortgage-backed securities, many of them foreigners, from suing U.S. banks and forcing them to buy back worthless mortgage securities at face value - right now almost 10 times their market worth.
The ticking time bomb in the U.S. banking system is not resetting subprime mortgage rates. The real problem is the contractual ability of investors in mortgage bonds to require banks to buy back the loans at face value if there was fraud in the origination process.
And, to be sure, fraud is everywhere. It's in the loan application documents, and it's in the appraisals. There are e-mails and memos floating around showing that many people in banks, investment banks and appraisal companies - all the way up to senior management - knew about it.
I can hear the hum of shredders working overtime, and maybe that is the new "hot" industry to invest in.
edgar,
This (rather abrasive) fellow has some interesting observations on the Citi-ADIA deal:
'Aqoul: Citigroup: "Arab" Capital, Need and Fear
But can Citigroup move their SIVs to their balance sheet?
Pandit said he is not taking anything off the table, nor putting anything on, makes you wonder what they might consider doing. Selling off assets that are already leveraged? Takeover? What?
Hey, Mitsubishi, run, don't walk away from that 'offer':
RPT-Japan's MUFG asked to help subprime fund - paper
| Reuters
Though he was telegraphed as a front-runner, I remain fairly surprised that Citi went with an in-house candidate given the depth of the issues they've got. It would have been more reassuring if they could've brought in a strong external hand, but my perception of this selection is that their problems are significant enough that nobody from outside the firm really wants the job.
I'm not so convinced that Pandit is that new a broom. The way he was "acquired" and the initial interviews he's appeared in don't lend any appearance of strength to either him or the firm's position.
While I'm on the subject, Citi seems to me to be the victim of a monkey see, monkey do, type phenomena. I don't have a link or anything, but my general feeling was that they were a relative newcomer to the whole MBS, CDO, type game. They struggled for two years trying to increase profits, and stock price, with little success. They then saw what the other banks were doing and jumped in with both feet at the absolute worst time. I despise bankers more than I can tell you, but it seems to me what Citi lacks more than anything is a solid business plan. With a possible recession around the corner that is a tall order to fill, they may not survive without help, both monetary, and brain-wise.
bmc, thanks for the link.
Where the hell is Bill Lerach when you really, really need him (to help the Japanese/Chinese/Brits crucify GS/JPM/C with a nice cramdown of sorts)?
Thanks for the reading material, tranches of love.
We are just weeks away from the point when virtually every CDO begins withholding interest in the equity tranches. Probably 80% of CDO's are there or almost there. The structures will allow the senior tranche owners to vote on whether the CDO should be liquidated; and they will all say yes.
All at the same time. Think synchronized panic sale in bonds.
Meltdown Man, I almost posted that Paul Simon video. Nice lyrics!
Trainwreck, yes, I think Citi can take the assets onto the balance sheet. They might have to raise some more hard money capital - or sell some assets, but I think they can do it.
ndk, I've heard that Pandit was the guy from the day Prince stopped dancing - at least that was the speculation on the street. Will he sweep clean? If he is smart, he will.
Take the hits NOW. Blame them on Prince, and move on. Six months from now, any hits will be Pandit's fault - the honeymoon period is short.
Best Wishes.
CalculatedRisk,
If Citi is able to consolidate >$60B from its SIVs, that would be a positive sign about its cap ratios. So far, Citi has relied on the ``we're not obligated to bail these out'' line, which is true, but hardly confidence-inspiring.
"Though he was telegraphed as a front-runner, I remain fairly surprised that Citi went with an in-house candidate given the depth of the issues they've got. It would have been more reassuring if they could've brought in a strong external hand, but my perception of this selection is that their problems are significant enough that nobody from outside the firm really wants the job."
Did not Citigroup try to recruit outside of their organization and fail? http://www.congoo.com/news/2007December5/Deutsche-Bank-Ackermann-snubs-Citigroup
The Super SIV has already accomplished its purpose. It bought enough time to bury the bodies. The same clock and measure of success is already working for the teaser freezer.
Robert Cote, can you expand on that? What do you mean they got time to bury the bodies? Where?
"Trainwreck, yes, I think Citi can take the assets onto the balance sheet. They might have to raise some more hard money capital - or sell some assets, but I think they can do it."
I appreciate the answer, but my impression is that Citi is heavily levered. They have what 2.3B or so in assets? Are they not also fairly close to that number in liabilities?
Maybe I am assuming they are not being completely honest about their potential loses.
infiniti-We are just weeks away from the point when virtually every CDO begins withholding interest in the equity tranches.
can u explain this?
SuperSIV Melting Away
Hall & Oates: Out of Touch
They're out of touch
They're out of time
Shaken up is all that they know
Using the money up as they go
Hyping up the fantasy
The banks all around are no longer lending with glee
SuperSIV just melts in the sun
And times that are broken just cannot be won again
We were sold a loan
And sold really matters to me
They're out of touch
They're out of time
But they're out of their cash when the fund goes down
They're out of touch
They're out of time
But they're out of their cash when the fund goes down
Offering up something once sold
Looking for returns when the climate is cold
Mad Money and fearful dreams
Or seeking out the middle between the two extremes
Toxic funds hot to the touch
Would cool down if we didn't use them so much
We were sold a loan
And sold really matters to me (Too much!)
They're out of touch
They're out of time
But they're out of their cash when the fund goes down
They're out of touch
They're out of time
But they're out of their cash when the fund goes dow
FT - Chance to restart the stalled securitised credit machine "Wall Street is beginning to realise just how deep in the kimchi it is."
FT.com / Financials - Chance to restart the stalled securitised credit machine
I'll take a noob stab at this...
The idea of a Super SIV still makes zero sense to me. You take a bunch of worthless loans and pool them all together and...somehow that makes the worthless loans worth something?
When the flood waters are rising, the last thing you want to do is dump more water on the flood. Maybe the whole idea was trying to find some way to park the stuff (off the balance sheets) until the flood receded a bit. Not the greatest solution, but might have been the lesser of the evils.
This is totally off-topic but you all seem to know about this stuff... I own a chunk of a American Century REIT in my 401(k) and am wondering how it lost 20% in one day. Anyone have a source for news on REITs? Isn't 20% in a day pretty extraordinary for a fund like this?
REACX: Summary for AMERICAN CENTURY REAL ESTATE FU- Yahoo! Finance
AMERICAN CENTURY REAL ESTATE FU
Net Asset Value: 22.32
Trade Time: Dec 11
Change:\tDown 5.55 (19.91%)
Prev Close: 27.87
I just wonder who it is that Vikram Pandit knows. Morgan Stanley, Credit Suisse, Citi, appear to be in the same boat now. I don't believe that a hedge fund strategy will succeed. They need:
1) Money to cover losses.
2) A reliable income stream.
I do not believe that Pandit can feed a beast as big as C with his (limited) connections, no matter how smart, or how many degrees he may possess.
Morgan Stanley issues full US recession alert
Morgan Stanley issues full US recession alert - Telegraph
O/T and apologies if this has been noted already, but Greenspan has a priceless Op-Ed in tomorrow/Wed's WSJ. Here are some choice quotes, as well as the original text that Alan edited.
Over the past five years, risk had become increasingly underpriced as market euphoria, fostered by an unprecedented global growth rate, gained cumulative traction.
Euphoria, fostered by unprecedented [negative real interest] global growth rates...
The root of the current crisis, as I see it, lies back in the aftermath of the Cold War,
The root of the crisis lies [with me]in the aftemath of the Cold War.
In my judgment, however, the impact on demand for homes financed with ARMs was not major.
[was] was not major
But I did fret that maintaining rates too low for too long was problematic
[I screwed up] I did fret
Then there are a few genuinely interesting paragraphs about central banks' recent inability to influence long term rates, but then...
The current credit crisis will come to an end when the overhang of inventories of newly built homes is largely liquidated, and home price deflation comes to an end.
Wait, after that whole article, Alan thinks this is ONLY about too much new home inventory? Hilarious.
Ken,
Look at the holdings of that fund:
TOP 10 HOLDINGS ( 54.19% OF TOTAL ASSETS)
Company Symbol % Assets YTD Return %
SIMON PPTY GRP INC SPG 8.40 5.58
PROLOGIS SBI PLD 7.92 20.70
PUBLIC STG PSA 5.71 -15.43
BOSTON PPTYS INC BXP 5.26 -1.29
KIMCO REALTY CP KIM 5.20 -5.28
UDR INC. UDR 4.69 -21.81
VORNADO REALTY TRUST VNO 4.43 -5.30
HOSPITALITY PROP TR HPT 4.22 -2.93
APT INV & MNGMNT CO AIV 4.19 -14.40
GEN GROWTH PROP INC GGP 4.17 7.55
Amazing!
At some point people are going to realize that "the authorities" have no control over this situation.
Plan A was a pathetic PR battle with reassurances that things were contained, and that the economy was too big and resillient to be affected.
Plan B was rate cuts, especially the shock-and-awe 50 bps rate cut, and frantic money pumping.
Plan C was the MLEC Super SIV.
Plan D is the "Rate Freeze".
Who still believes the Fed or the gubmint can fix this mess? I think a good number of investors realized today that they cannot.
tranches of love,
Thanks for the Aqoul link: a cursory perusal makes me think it's worth bookmarking.
Ken
Check if the fund distributed any big dividends today. When that happens, the fund price dips exactly by that distribution amount.
well, CNBC out of ignorance or PC reasons won't touch it, but I bet the columnists ( think Michelle Malkin, Oreilly etc ) on irreverent firebrand dailies in India, like Loksatta or Midday WILL say it -
You put a Pandit ( Pandit - Wikipedia, the free encyclopedia ) which means teacher, scholar at the head of a mercantilist organisation and yer sunk. You needed a Patel or a Shah or a Ambani.
Ahhh, the sins of one's ancestors.
-K
P.S. - This is all lighthearted from my perspective.
FT.com / US / Economy & Fed - Fed to overhaul provision of market liquidity
Fed to overhaul provision of market liquidity
By Krishna Guha
Published: December 12 2007 05:01 | Last updated: December 12 2007 05:01
The Federal Reserve is set to announce as early as on Wednesday a fundamental overhaul of the way it provides liquidity in financial markets in a bid to tackle head-on severe strains in the interbank money market.
I wonder if Virgin will make a bid for WaMu; I know they didnt have cash for The Rock, but maybe WaMu will be a better deal?
Ah hey Moe that makes sense--perhaps it takes a day for the dividend to show up. I'll look again tomorrow. Thanks.
RE Citi:
When you've got an Arab sheik shareholder complaining about expense control at your bank("complaints in July 2006 from the bank's largest individual investor, Saudi billionaire Alwaleed bin Talal, over escalating corporate expenses"...Bloomberg today) you know your bankers have been running wild. That might partly explain the lousiness of Citi's performance.
It's surprising to me that there isn't more coverage in the mainstream press regarding Saudi ties to Citibank. Considering the complexity of the US relationship with Saudi Arabia, and the controversies over purchases of certain large US assets by other Middle Eastern investors, there ought to be more coverage.
From my FT link above:
"There is, it seems, one little opening, under 'Lending to Non-Depositary Institutions'. Apparently, 'the Federal Reserve has the authority to lend directly to individuals, partnerships and corporations (IPCs), which could include depositary institutions, under sections 13(3) and 13(13) of the Federal Reserve Act... However...
Naked Cap posted the FT article here:
naked capitalism
Considering the complexity of the US relationship with Saudi Arabia...
We buy oil from them, the terrorists they bribe into not overthrowing their corrupt governments turn their attention towards us, they blow up our buildings, we start needless wars, driving up the price of oil, giving them more money to give to terrorists, then they buy all of our companies and crappy modern art.
Yay!
then they buy all of our... crappy modern art
It had to go somewhere. In the desert it may be preserves for Eons as a warning to emerging countries and cultures.
Man, I have to write it somewhere.
I am a FRICKING MASTER. Two days and I've already cobbled together a better design than... well, damn, I can't say who it is but they're big.
A fricking master, my friends!
But section 13(3), Small and Clouse say, "provides virtually no restrictions on the form a written credit instrument must take in order to be eligible for discount".
Oh yeah!
Taking my Beanie Babies down to the discount window!
I'm rich, bitch!
Broward Horne,
I am a FRICKING MASTER. Two days and I've already cobbled together a better design than... well, damn, I can't say who it is but they're big.
I've been tracking your comment on EBay. You JUST posted it and the bidding is already up to $1.2 trillion. It seems there's an overseas hedge fund in trouble and it was specifically looking for a "fricking" miracle.
Oh CRAP! My comment isn't even posted yet and I'm seeing the bidding on my comment pushing $100 already. This is really getting out of hand! It seems even the comments having anything to do with the brilliance of your plan are being bid up.
I'm no fricking master. I'm a depreciating asset sitting on top of a fricking solid foundation, much like a parasite. Why don't people realize that? I'm cashing out! $150 it is!!
I'm going to post more about your fricking plan every chance I get!! Money has never been this easy to make before!
Boys boys! Tanta is the only fricking master around these parts. Go to bed and leave a night light on in case creepy Mr. Greenspan tries to bite your big butt. Good night.
infiniti-We are just weeks away from the point when virtually every CDO begins withholding interest in the equity tranches.
can u explain this?
idoc | 12.12.07 - 12:31 am | #
A massive wave of commercial papers issued by CDO/SIV mature in the coming several weeks. Given the current credit crunch, there is no way that they can rollover these commercial papers, which makes their operations difficult. The first sign of the crisis is that they stop paying interests to the junior equity tranches. In reaction, investors in the senior tranches try to protect their investment principals by voting to liquidate the entities.
its rare for me to think "sky falling down" about the situation at the moment - descending with some rapidity would have been my characterisation but this talk of innovative, creative ways of supplying MUNNY by the Fed is spooking me.
The only hope is : have they checked it out with the Chinese yet ? After all, they've got a LOT of skin in this game - lets hope they say: Nyet ! ( I know, I know ).
-K
Two days and I've already cobbled together a better design than
Okay, I'll bite. Design of what? Art museums?
Does anyone know where vader went?
Re: But section 13(3), Small and Clouse say, "provides virtually no restrictions on the form a written credit instrument must take in order to be eligible for discount".
Oh yeah!
Taking my Beanie Babies down to the discount window!
FFDIC,
The night light isn't working. I think it is just encouraging the voices under my bed to keep talking. How am I supposed to sleep with all that mumbling?
We owe it to those who will retire over the next couple of decades to promise only what the government can deliver. The present policy path makes current promises, at least in real terms, highly conjectural. - Alan Greenspan, November 3, 2005
"how it lost 20% in one day"
Ken | Homepage | 12.12.07 - 12:49 am
Its $4.0893/share (including Unrecaptured Section 1250) distribution on Tuesday, 11 December, is here.
At a reinvestment NAV of $22.32 I calculate it fell from $27.4/share (Monday's close) to $26.4093/share yesterday.
That would be a 3.6% loss in net asset value in one day. But then, it's a REIT.
"Given the current credit crunch, there is no way that they can rollover these commercial papers"
Moe | 12.12.07 - 1:49 am |
What about the FHLB? Seems to me they're buying several hundred billions of unrolloverable paper. I ask because I'm getting the impression the existing SIVs don't need the money markets, much less a Super SIV, with the FHLB behaving so accomodatively.
Considering the complexity of the US relationship with Saudi Arabia...
As a responsible journalist, I stress there is no evidence for the rumor that the unidentified investor in UBS is a close relative of Osamma bin Laden.
MLEC = DOA