Special Edition Five Things You Need to Know: Competing Wall Street Banks to Launch Incomprehensible Joint Venture to Bail Out Something You've Never Heard of Threatening to Do Something You Don't Understand to Something You Don't Care About

By Kevin Depew  OCT 15, 2007 1:08 PM

What you need to know (and what it means)!


Minyanville's daily Five Things You Need to Know to stay ahead of the pack on Wall Street:


Competing Wall Street Banks to Launch Incomprehensible Joint Venture to Bail Out Something You've Never Heard of Threatening to Do Something You Don't Understand to Something You Don't Care About

Citigroup (C), Bank of America (BAC) and JPMorgan Chase (JPM), the three largest U.S. banks, are reportedly working together to create a fund called a "conduit" that will buy around $80 billion in bonds and other debt from what are called structured investment vehicles (SIVs).  This sounds important.  God help us. 

I've spent hours now attempting to slice through the gibberish spewing from these banks and the best I can come up with is this:  Just tell me how much I owe, who I need to make the check out to and if it's possible to structure some type of payment plan in case the balance due is beyond my capabilities.  I'm serious.  The degree of twisted obfuscation here - obfuscation being Wall Street's one true asset class - is stunning. 

1.  What's the news?

The articles appearing in papers this morning all state unequivocally that the M-LEC won't buy subprime mortgage assets, which is where the confusion begins, because by using the phrase "subprime securities" the banks (via the media) are essentially tossing a maguffin into the frame. 

With respect to the SIVs this is a non-sequitor.  It is meaningless.  Why?  Because this is not about subprime mortgages.   This is about the Asset Backed Commercial Paper market (ABCP). 

2.  What, exactly, are SIVs? 

3.  So, what's the problem?

4.  What does that mean? 

5.  What's next?

No positions in stocks mentioned.

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