How does anyone make $ from this fund? Blackrock obviously profits cos they take a cut from the funds collected. But if this super-SIV suck up all the CDOs, who is it going to sell it to?
They don’t have to sell, they hold it to maturity. The problem with the market right now is that, there is no buyers, limited liquidity, the only ones that are selling are selling at steep discount, coz they need the money.thus the market price is extreemly low and everyone else have to mark it at that price…and that screws up their capital ratios and then they need to sell at steeper discount to shore up capital …and so on Lower rated tranches are history, But the AAA rated ones? these guys are worth more than 30-40 cents on the dollar…Agreed the underlying is messed up, and heard about 16% of 2006-07 vintage is currently 30 day or more past due. But even if everything goes into foreclosure, the underlying property is still worth something, even if it is in Vegas…
I see your point about the spiralling prices if everyone is desperate for liquidity to honour their SIVs ABCPs… but arent the banks that require short term liquidty to avoid screwing up their Tier 1 ratios the same guys that Citi, BOA and gang are asking $ from?? Is there some element of leverage here at play if its a new super-SIV thats buying up all these stuff?
Yeah, I haven’t read too much about it, but I think this is where Paulson comes in…Treasury/OCC/OTS will assign an investment into this SIV a low weight for the risk based capital ratios, thus the banks would not need to hold as much capital for this investment, and get to transfer CDO’s (high risk based capital requirement) into the SIV. Also, banks usually do not hold these, Citi, Bear, Merrill are the big boys when it comes to CDO exposure, BAC & JPM have comparatively less exposure, WB, WFC, WM etc have next to none.
Hmm… you are right about the part that under Basel I/II, these various tranches may probably get a lowered weightage on their CARs… esp the “credit proof” super seniors. But actually quite a few banks do hold part of these CDOs on their books, not all are in offbalance sheet SIVs like the Cullinans, Asschers, Whistlejackets… Based on Level 3 inputs, Citi has approximately 72bln remainig, UBS has about 38bln remaining. This is also the reason why these investment banks are expected to declare further writedowns… They’ve got the worst of the toxic contamination.
wow…those are big numbers…don’t know how much a 80B fund help. are you involved with any of this stuff?
im just a small-fry analyst… poor disclosure of off-balance SIVs arent helping either. There’s an article recently which talked about HBOS (Halifax) having to announce and take back ownership of Grampian Funding - a previously never disclosed before off-B/S SIV conduit. http://www.efinancialnews.com/homepage/pressdigests/content/2349058099/restricted