naked capitalism

Despite the widely-held view that the SIV bailout plan engineered by the Treasury Department and sponsored by Citigroup, JP Morgan, and Banks of America will be largely irrelevant, the program keeps moving forward. We have the latest press release, um, update, courtesy Bloomberg:

The “SuperSIV” fund, set up to provide cash to structured investment vehicles hurt by the collapse of the subprime-mortgage market, plans to start buying assets “within weeks,” its sponsors said today.

The fund’s size, originally envisioned at about $80 billion, will be based on “SIVs’ needs and evolving market circumstances,” Citigroup Inc., Bank of America Corp., JPMorgan Chase & Co. and BlackRock Inc. said in an e-mailed statement. The banks are raising money for the fund while BlackRock will manage its assets….

The fund, also known as the Master Liquidity Enhancement Conduit, or M-LEC, can still provide “an optional source of liquidity for eligible high-quality assets,” the banks said in the statement.

Update, 12/19, 3:00 AM: In comments, alert readers have pointed out that Sigma, an SIV in all but name, managed by Gordian Knot, may be a $50 billion shoe about to fall. Additional tidbits from the Financial Times:

Syndication of the bank liquidity facility for the fund should be completed by the end of the week, allowing the fund to start marketing to SIVs. It is expected to be up and running by January….

In recent weeks, a number of banks that manage SIVs have said they will provide funding for the vehicles. Last week, Citigroup, which is one of the banks backing the superfund along with Bank of America and JPMorgan Chase, said it would take SIVs with $49bn of assets on to its balance sheet. Observers have said that these moves have reduced the potential supply of assets to the superfund.

But people close to the fund say these SIVs might still sell assets into the fund.

In a joint statement, the banks and BlackRock said they “applauded” the moves by SIV managers. The superfund was intended “as another solution to help facilitate orderly short-term credit markets”, they said.

“As SIVs unwind by selling assets, M-LEC is intended to play a constructive role by offering SIVs an optional source of liquidity for eligible high-quality assets,” the statement said.

The size of the fund, which was originally estimated at $75bn but is now expected to be smaller, would be driven by “SIVs’ needs and evolving market circumstances”.