Good point, and good questions. They led to this post. Feel free to make any comments or corrections.

Citi secured funding throug year-end for $80 billion of SIVs. This is after they sold $20 billion of assets. Does this mean their “bid-to-cover ratio” was .8? If so, this is a big problem.

Don’t they have $400 billion in SIVs? Is all that funded through year-end? And how is it funded? Did they roll-over the ABCP or use the back-up lines of credit? And at what price did they pay for this funding? Their is an old line on the bond market that “their are no bad bonds, only bad prices.” If you offer enough in yield, you can always get funding. The problem then is the SIV is in a negative carry position (the cost of funding is higher than the yield of its assets) and is losing money everyday.

This proclamation that they have secured funding raises more questions than it answers.

I hear a lot of “talk” about transparency, but nobody is DOING anything about it. This may be Issue #1.

Can anyone possibly say that the last earnings reports of all the investment banks were transparent?

The problem with the financial reporting of all financial institutions is that they never disclose with any meaningful detail what their assets really are. And let’s not even get into the derivatives side of things (that is a real black hole).

This continuing lack of transparency has quite ominous implications for the world financial markets. We could enter into a situation where nobody trusts anybody else, in which case money is neither lent in the credit market, nor invested in the stock market, and the entire system breaks down.

Bernard

(… “Due to investor anxiety and/or insufficient transparency”

So why don’t they just address the insufficient transparency problem then? This is the crux of the matter. It’s obviously the least costly, least burdensome route EXCEPT that to do so would expose just how worthless these assets are. These guys are doing all they can to avoid coming clean about just exactly what comprises these assets .. because they stink. The ‘market’ knows this and that’s why it has frozen up.

Until somebody starts the inevitable avalanche of true, accurate, transparent disclosure (and takes the huge $$ hit that entails), nothing will free up this market. Trust has evaporated. It’s a Missouri market now (as in show me)

As a general group, SIVs are in trouble not because their underlying assets have deteriorated in quality (though some of this has happened) but because they are having trouble rolling over their debt. (Due to investor anxiety and/or insufficient transparency.)

If the super-SIV really does stuff itself with very high quality assets (cross your fingers for no more downgrades), is transparent about this, and backs it up with some liquidity guarantees, then that could get the ABCP rolling again. That is, assuming that investors are avoiding ABCP because of uncertainty about existing SIVS’ asset base rather than a general distrust of all AAA and AA rated assets.

The feeling I get from reading the WSJ is that they’ve pretty much given up lower quality assets for dead.

My 67 Mustang (doesn’t run) is worth $1k, but if you by it and say it does run, then it’s worth $10K?

Whom are the stupid people here?

http://www.cairncapital.com/publicdocs/ Guest%20Opinion%20-%20Road%20to%20Recovery.pdf

http://www.emergingmarkets.org/article.asp?PositionID=2601&ArticleID=1463222&LS=EMS145798