Rabobank bails out SIV, "model is dead"
Submitted by
CalculatedRisk on Thu, 12/06/2007 - 7:23pm (27 comments)
![Syndicate content](/misc/feed.png "Comments for \"Rabobank bails out SIV, "model is dead"\""){kind=small}
Shopping at Amazon?
Wait! If you click on the Amazon banner link at the top of the page first, HCN will get a percentage of anything you purchase for 24 hours!
Open predictions
Our local book authors
User login
Who's online
There are currently 2 members and 143 guests online.
Currently online
Recent Recommendations
Paulson!
Can you lend me $750 to pay my credit card bill this month? I promise I'll stop buying too much stuff.
While youre at it, send that same memo to O.C.
"Tango Finance"
Just imagine all the deal toys and lucite blocks with "Tango Finance" printed on them that will now be discretely buried in office wastebaskets under the used Starbucks cups.
SIVs are dead
Paulson and Citi: "We see dead SIVs!"
No wonder they scare the bejeezus out of Paulson and Citi.
"Citigroup, which helped set up the SIV and provides back office services, had not invested in the vehicle. A spokeswoman for Citigroup, which manages $66bn in its own SIVs, said: Citigroup has no responsibility for the funding of Tango."
So my question is...were they just called in for their expertise?
Seems to me CITI is the industry leader in deep-discount SIV's.
the assets in the portfolio are of high quality, but there is no market
Is it just me, or is there something seriously wrong with that statement?
tj & the bear, a very funny statement. At least they did the right thing and moved it to their balance sheet - where it belongs.
Best Wishes.
they should have called it
Tango & Cash after the worst movie ever made.
========================
Our decision has been made purely for liquidity reasons as the assets in the portfolio are of high quality, but there is no market for asset-backed commercial paper for SIVs. We have done this for reputational reasons as our exposure to the SIV is small, Mr Villiers said.
Which is it, Mr Villiers? For liquidity reasons? Or reputational reasons? Either way, this statement makes no sense to me.
tbizzle,
I liked perving on Terri Hatcher though..
Cheers,
Can somebody help me out with something I don't understand.
I once learned that a rule of finance is: every share of stock is owned by somebody.
So, I understood that the shares (?) or whatever in an SIV are owned by somebody. How does a bank just take property that belongs to somebody else onto its books?
To give an example, Vanguard manages mutual funds that are owned by shareholders. Likewise hedge funds. But you would never hear about Vanguard or hedge funds just taking shares onto their books.
I mean, is ownership of SIVs so meaningless than it can just be passed back and forth? At what price?
Are they saying by "taking it onto their balance sheet" that they are serving as guarantor?
After the theatre of the absurd aka "The Big Freeze" its good to see this particular madcap stupidity meet its maker.
Maybe I can put away Catch 22 for a bit and stop marveling at the insanity that prevails at this moment.
-K
rich,
If I may, and I'll probably get clobbered here, but let me give it qa try.
Shiti goes out and rounds up investors to give $1B to an entity created by Shiti. Shiti then arranges to sell short term CP at some X leverage for the investors, and manages the transaction. Then Shiti goes out and buys a bunch of long term paper rated A to Aaa to support the CP. Technically, they don't run the fund, and it is owned by the investors. Shiti just guarentees the CP for the Sewere...SIV...to a certain extent. However when the fit hits the shan, they either get a regulatory overide (as Shiti did a few months back) and pump cash into the rolling CP or they put it on the books and become defacto owners/managers of the fund. Clear as Mud...yeah?
Cheers,
Memo to Paulson and Citigroup: SIVs are dead.
"eee's not dead... eee's just restin"
is this what you call "a dead parrot bounce" ?
RayOnTheFarm,
Right then I'll bite:
YouTube -
Cheers,
sk:
"Hey, they can't do that!"
"They can do anything you can't prevent them from doing. That's Catch-22"
Just reminiscing.
alright, just for those who've never read Catch-22, Yossarian is the main character in Catch-22 - along with.. but I digress.
-K
LOL...
"eee's not dead... eee's just restin"
Hadn't thought of it, but Monty Python provides plenty of quotes to frame this mess:
"It's just a flesh wound."
(From the knight who's just had his arms and legs (and head?) lopped off)
"...the assets in the portfolio are of high quality, but there is no market..."
Well sure: high quality means priceless. Now I get it.
The Dutch bank plans to take assets worth 5.2bn ($7.6bn) on to its balance sheet to prevent a fire sale of Tango Finance.
So... Tango Finance is basically 'Tango Uniform' then?
We have done this for reputational reasons as our exposure to the SIV is small, Mr Villiers said.
Hahaha! WAY too late for that.
Misean,
Then it's the SIV's debt instruments (CP) that the bank is taking onto its balance sheet, not the SIV's assets. That sounds right. It's the MSM's account of taking "assets" onto balance sheet that threw me. Yes, these are assets of the bank but debts of the SIV.
Misean | 12.06.07 - 11:35 pm | #
I think the explanation does not show how the money is (well, maybe was) made.
a) Investors put in 1 billion to SIV
b) get ABCP/CP (i.e short term loan) for 14 Billion say at 4.5 %
c) Use the loan plus investments (15 billion) to buy longer term paper. MBS etc which probably pay around 5.5.
d) investors get 15b*(5.5% -4.5%) less fees
Cruicial points.
i) Rate for loan/Issue of ABCP/CP are dependent on rating of the SIV (apparently now does not matter what the rating is)
ii) In an Unwind, did the CP/ABCP note holders get all back. i.e.did they get 14bill or part thereof
iii) Was the ABCP/CP taken on the book at par/deep discount
i.e. ii and iii determine how much the parent/Rabo was out of pocket.
I would like to propose a new acronym for Specilized Investment Vehicles:
URB -- Un-Regulated Banks