SIVs: they’ll have to decline in value by $2.5 billion, or more than 5%,
before Citi takes a penny in losses. No wonder Citi found it relatively easy
to sell
tens of billions of dollars of the SIV assets back to the junior investors:
even this bail-in isn’t going to save those investors.
Interestingly, only 28% of Citi’s SIV assets are mortgage-related; fully 60%
of the assets are invested in the debt of financial institutions. Sure, those
institutions themselves are being hit by mortgage-related losses. But I remember
that the
first CPDO to fail was one which invested in financial-institution debt.
Maybe bank bonds are the new subprime mortgages.