December 14, 2007

FLASH: Paulson's "Super SIV Deception Plan" dead - Citigroup reverses course and takes $49 billion in hidden mortgage trash onto their balance sheet


Hank Paulson's "Super-SIV" Deception Plan has now gone officially bust, with Citigroup pulling the plug on this game last night and deciding (finally) to put the cancer on their books.

This shameful attempt by Hank Paulson to conceal and deceive, avoiding a "mark to market" on depreciating assets so insiders could continue to loot their companies, simply couldn't survive in today's world of blogs and 24-hour media. Maybe back in the good old days at Goldman you could've gotten away with such blatant deception. But no more.

HousingPANIC now calls for the resignation of Hank Paulson, and a Senate investigation of his activities at Goldman Sachs in relation to CDOs and SIVs, and also his recent deceptive and corrupt activities while at Treasury. Everything this guy touches is blowing up in his face now - the Super SIV Deception Plan,the thoroughly discredited Housing Gambler Bailout Plan, and most importantly the US dollar itself.

We have a fox in the henhouse HP'ers. Time to root him out.

Citigroup Alters Course,Bails Out Affiliated Funds - Taking on $49 Billion Of Assets Further Dents Banking Giant's Capital

Citigroup Inc., bruised by mounting losses, is bailing out seven affiliated investment entities, bringing $49 billion in assets onto its balance sheet and further denting its depleted capital base.

While Citigroup's action may ease uncertainty about the future of its SIVs, it may be the death knell for an industrywide effort to create a rescue fund for the struggling vehicles.

Helping to organize the so-called super-SIV rescue fund was one of Treasury Secretary Henry Paulson's first responses to the market turmoil, and was controversial from the start, with some critics saying it essentially represented a bailout for the SIV industry. The banks involved dismissed that notion, saying that it would merely provide one more option for SIVs that were in trouble.

27 comments:

Anonymous said...

As soon as the SIVs got into trouble in the summer, the most obvious solution was for the banks affiliated with the SIVs to take them onto their balance sheets. The fact that none of them did so straight away raised a red flag over the SIV mess, because banks, always eager to protect their reputations, tend to move quickly to shore up any affiliated entities that run into trouble.

Instead, the U.S. Treasury sponsored a move driven by Citigroup (Charts, Fortune 500), J.P. Morgan Chase (Charts, Fortune 500) and Bank of America (Charts, Fortune 500) to set up a new, larger Super SIV that would buy up assets from the SIVs that came under pressure. Since Citigroup has by far the largest exposure to SIVs - its seven SIVs held $83 billion of assets as of Sept. 30 - the Treasury's Super-SIV looked very much like a way of supporting Citigroup.

Anonymous said...

I expect the dow to jump 400 on the news.

Anonymous said...

You are missing the bigger picture. Citi is only bringing the good SIV assets on the balance sheet. The bad SIV assets were probably put in other off balance sheet entities or sold to hedge funds with a right to sell back to Citi.

Anonymous said...

It's FDR time! Either that or complete chaos and destruction will occur. Bankrupt banks have to be reorganized. And only government has the authority to reorganize the present bankrupt financial system.

Anonymous said...

FDR time, fuck that. FDR is what gave us the creeping communism which blew up into full communism thanks to LBJ.

Any other brilliant ideas asshole>

bubba said...

"It's FDR time! Either that or complete chaos and destruction will occur. Bankrupt banks have to be reorganized. And only government has the authority to reorganize the present bankrupt financial system."

They're only bankrupt if someone is willing to admit that they're bankrupt. Don't you see the ruse here? As long as the checks clear and the ATMs work, everything is fine, now move along troublemaker, or we'll call the police.

Vandal said...

It's easy for them to do it now with a new CEO. They can simply blame all the problems on Chuck Prince for the next six months.

The banks are all lining up at the confessional now.

I still believe IndyMac will be the first big failure. They don't have the perks of a central bank and are WAY over-leveraged in Alt-A crap.

I need a bj said...

I can't wait to see paulson hauled away in handcuffs soon.the guy is a total crook just like most of bush's cabinet.Citi stock is up on the news they have to write down 49 billion.I am going to buy a million shares at 30.They can't lose with all the corrupt officails on their side.

Anonymous said...

bubba said...
"It's FDR time! Either that or complete chaos and destruction will occur. Bankrupt banks have to be reorganized. And only government has the authority to reorganize the present bankrupt financial system."

They're only bankrupt if someone is willing to admit that they're bankrupt. Don't you see the ruse here? As long as the checks clear and the ATMs work, everything is fine, now move along troublemaker, or we'll call the police.

December 14, 2007 3:54 PM

=================================
The more rational among the bankers are seeing that there is no way out. I agree however that alot of the bankers are insane and would rather die than be subjected to regulation.
QUOTE:
December 14, 2007 (LPAC) -- A senior European financial source told Executive Intelligence Review today that the coordinated bailout action by European central banks was taken only as an emergency stopgap to prevent a banking crash between now and Christmas/New Year. The action does not address the banking crisis and was not intended to do that.

The source described the credit crunch as "worsening by the hour," and the situation as "unbelievably bad." Although he may be overly optimistic, LPAC views the analysis by this source as in the right direction.

PS- the idiot that equated FDR to communism. You should learn your history. FDR used his power as President to save the nation and revive the American System of Political Economy.If not for FDR you wouldnt be here today taking up space.

Anonymous said...

Citi is heading the way of the dot coms.

The "high quality" paper in those sivs are probably worth 70-80 cents on the dollar, and there is almost no way that they unloaded 35 billion in siv assets between Sept. 30 and today without all kind of covenants and that are going to bring the liability boomeranging back once the recession sets in.

The same is true of Citi's mortgage and credit card exposure.

Recession = Citi bankrupt. And a recession is guaranteed.

Ed said...

I see lots of publik skool edumacated people here. FDR did not end the depression. WW2 ended the depression. All FDR did was create the monster we call today's federal gov't.

borkafatty said...

Any other brilliant ideas asshole>

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Either have respect for a fellow blogger or leave dick head..we don't need asshole comments we have enough to deal with...anonopuss!

Anonymous said...

Hmmmm. We have the Fed creating an auction with $40 billion this week and then we have Citi putting $49 billion on the books. The auctions open next week and they don't need to be public.

Can you guess what is going to happen? Hilarity will ensue!

Andy in San Diego said...

Another good reason to due away with xmas! No more financial-world-revolving-around-xmas.

[to myself, rubbing hands together] My diabolical scheme to eliminate xmas is almost complete...

Anonymous said...

"If not for FDR you wouldnt be here today taking up space."

America was one of the last countries to come out of the great depression pole smoker

BondsOfSteel said...

So, the reason this happened...now... was pressure from the rating agencys. They were going to downgrade within the next few days forcing default. (Finially, since the rating agencies are complicit in this mess.)

They're not done. There are more SIV assets out there, and they are also looking at CDO downgrades.

The SIV downgrades will force more banks to dissolve SIVs to maybe save some money market/short term bond funds who are holding their CP. It's these funds that are forcing Citigroup to act. (If Citi screws the state of Flordia... well maybe taking the losses on the SIVs is bettter than losing their buiness.)

The CDO downgrades will force more write downs and losses at the financials. This is just getting started....

Anonymous said...

Isnt this a case of a US Bank bailing out off shore hedge funds? Let the hedge funds go and keep the banks.
Most of these hedge funds are incorporated in the Cayman Islands. Let the Queen of England bail them out if she so desires, but dont put all those toxic loans on our books.

Anonymous said...

I see lots of publik skool edumacated people here. FDR did not end the depression. WW2 ended the depression. All FDR did was create the monster we call today's federal gov't.

December 14, 2007 5:18 PM

Ed, who is responsible for taking care of this mess? If it isnt the federal government then who? Wall Street, the little green men under the floorboards, then just who is it?

lovethatbush said...

Time to remove the whole Libertarian- Neocon-Bush-Cheney crime family.

Anonymous said...

Meanwhile, the GOP clowns were debating if Lucifer was really Jesus' brother or not. But the circus is complete now, Alan Keyes has joined in.

Oh man, this country is going down so fast with these freaks that's not even funny anymore...

Hecate said...

Is the Fed the new FEMA?

http://tinyurl.com/yos6ms

f'ed said...

depression?

ATLANTA - The suicide rate among middle-aged Americans has reached its highest point in at least 25 years, a new government report said Thursday.
-AP

Anonymous said...

Anonymous said...
FDR time, fuck that. FDR is what gave us the creeping communism which blew up into full communism thanks to LBJ.

Any other brilliant ideas asshole>

December 14, 2007 3:00 PM
-------------
Lets bring in the Rape-ublicans, they will surely know what to do!! Oh they were the one's that screwed up the economy to trigger the Great Depression that FDR had to clean up? Hmmmm. Never mind.

Anonymous said...

anyone notice the dollar surging and gold plummeting lately? I told you all were in an asset/euro bubble. When everyone on HP was saying buy buy buy gold/silver/euros, I was selling, selling, selling gold/silver/euros.

You sounded like the NAR circa 2005 and the results were the same.

Black Swan said...

Good for Citigroup.

shtove said...

Shakespeare's greatest villain, talking about the futility of ignoring the credit crunch:

"'I have’t. It is engendered. Hell and night must bring this monstrous birth to the world’s light.'

(Attribution: William Shakespeare (1564–1616), British dramatist, poet. Iago, in Othello, act 1, sc. 3, l. 403-4. Exactly what evil Iago has in mind is not yet clear.)"

http://tinyurl.com/2yoalj

There's a famous observation by Coleridge on Iago's character:

"The Motive-Hunting of Motiveless Malignity"

http://tinyurl.com/2hp5sx

Turn them around a bit, and Coleridge's words sum up the pure blah of the central bank system.

Hank Paulson seems a bit dim to carry off the role of Iago - so who is the true villain in this awful financial drama?

Satchel said...

It's really sad that we all immediately look to people or parties to solve our problems (e.g., calls for FDR, arguments that it is the "Rape-ublican's" fault, etc.).

One measure of how far we've fallen as a country is how quick we are to look to Government to solve our problems. And we want the problems solved fast.

The Founding Fathers must be turning over in their graves. That the bloat of government has infected our consciousness to this extent is tragic. (Incidentally, FDR was terrible, did extend the Depression, and did start - or accelerate, depending on your reading of history - our slide into dependency. But that's a subject for a different debate.) In the 1930s we heard calls for retirement security and government guarantees of housing finance. In the 1960s it was "social justice" and health care for retired people. Today, it's "universal health care". Disgusting, and sad.

You guys have probably seen this quote attributed to an obscure mid-20th century historian:

“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship….

Great nations rise and fall. The people go from bondage to spiritual truth, to great courage, from courage to liberty, from liberty to abundance, from abundance to selfishness, from selfishness to complacency, from complacency to apathy, from apathy to dependence, from dependence back again to bondage.”

Really makes you think.