You just knew it wasn’t going to work. How could anything with so ludicrous a name as “the Master-Enhanced Liquidity Conduit” possibly see the light of day? This was the Treasury-encouraged effort to get some of the world’s biggest banks - Bank of America (BAC), Citigroup (C), JPMorgan Chase (JPM) - to purchase assets from the troubled structured investment vehicles (SIVs), earning it the slightly more elegant nickname of super-SIV. The talks had been going on for months; in November, my erstwhile colleague Peter Eavis questioned whether the banks really had enough capital to pull it off, and indeed whether the whole scheme wasn’t just a way to bail out Citigroup, which was especially exposed to leaky SIVs. On December 10, The New York Times ran a story saying that the urgency for the Super-SIV was wearing off anyway.

Now comes word, via the Wall Street Journal, that the banks involved are “throwing in the towel.” The reason? The Journal chalks it up to “lack of interest,” meaning that these banks have simply decided to take their medicine and move these once off-the-books funds onto the books, and face the consequences. Still, if the SIVs start crashing, this abysmally named M-LEC beast might yet make a comeback.

The SIV bailout plan engineered by Treasury Secretary Henry Paulson is finally getting under way. The New York Times reports that the effort to pool funds from big financial firms to rescue troubled structured investment vehicles - bank-sponsored entities that issued short-term debt to purchase assets like collateralized debt obligations and subprime mortgages - moves into fund-raising mode today. But the paper also reports that Citi (C), the biggest sponsor of SIVs, is devising a separate rescue plan, seemingly reducing the need for the government-arranged effort.

Actions taken by other banks support the notion that the SIV bailout plan isn’t necessary. In France, Societe Generale became the latest European Bank to take troubled SIVs onto its own balance sheet, with a purchase of $4.3 billion in assets that’s intended to head off fire sales of SIV assets. HSBC (HBC) took similar action last month. The banks are acting as ratings agencies downgrade the SIVs, citing sharp declines in the value of their holdings. Societe Generale said its own SIV bailout will cause its key capital ratio to drop by only five basis points - an argument that some observers cite in favor of Citi making a similar move.

Brace yourself: Wall Street is looking at more writedowns. Adding to the growing chorus of analysts predicting more doom and gloom for Citi (C) and Merrill (MER) are Credit Suisse number crunchers. They took a back-of-the envelope approach in the wake of the E*Trade (ETFC)-Citadel transaction, which valued the struggling firm’s mortgage holdings at between 11 and 27 cents on the dollar. The Credit Suisse report says Merrill could be due for $9 billion worth of charges were it to mark its collateralized debt obligation holdings to market at levels dictated by the E*Trade deal, The Wall Street Journal reports. That pales, though, in comparison to Citi, which Credit Suisse says could face $26 billion in new markdowns.

To make matters worse, Moody’s is considering downgrading some structured investment vehicles, which will only add to pressure on bank sponsors such as Citi. Citi-backed SIVs holding $65 billion in debt were among those downgraded or put on review Friday by Moody’s, Bloomberg reports. The fourth quarter is certainly shaping up as another bruising one for the big banks.

Banks’ balance sheets are back in the spotlight. HSBC (HBC), the big British institution formerly known as Hongkong & Shanghai Bank, said Monday it will take $45 billion worth of troubled debt securities tied to structured investment vehicles onto its balance sheet, without hitting earnings or capital. The move “will set a benchmark and restore a degree of confidence to the SIV sector,” HSBC’s investment banking chief said (no doubt, with fingers crossed).

HSBC’s decision comes as Bank of America (BAC) is trying to bring other banks aboard an $80 billion SIV rescue fund alongside Citi (C) and JPMorgan Chase (JPM). So far that effort — which is intended to prevent the sponsoring banks from having to take these depreciating assets onto their balance sheets — has resulted in much talk but little action.

In a separate but related issue, The Wall Street Journal reports that Citi is resisting bringing $41 billion worth of another kind of troubled debt — collateralized debt obligations, or CDOs — onto its balance sheet. Some accounting experts believe Citi is obliged to do so. It seems clear the bank will continue to balk as long as it can, given that consolidating the CDOs would expose Citi to billions of dollars in additional losses. It’s a good guess that Citi shareholders feel they have had enough of those for now.