Falling through the super-SIV

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.