Anyone one wish to read something funny or sad or bizarre?
Here you go:
si.advfn.com
Citigroup Report: Banks agree on credit fund
New York (AP) - JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp. have agreed on a simpler structure for a $75 billion fund to steady creditmarkets, The New York Times eported Sunday, citing a person close to the talks. Under the agreement, pools of assets or structured investment vehicles won't need the approval of at least 75 percent of their investors to participate, the newspaper said in a report published on its Web site. The fund also will assign the same risk level to all securities in the SIVs.
The fund could start operating before next year, the person that the newspaper cited said, and the banks could be asking financial institutions to contribute as soon as Friday.
The fund could restore some liquidity to the market for asset-backed securities by establishing a buyer, even if no SIV uses it, the newspaper said. The proposed still must obtain the approval of credit-rating agencies.
Now, why is this funny?
It is a nakedly transparent means of avoding the valuations estabished by the relevant indices. The $75 bn sits in a fund, its managers agree that Tranche X, Y or Z of subprime CDO is worth 90% of par, and presto! there is an objective way of verifying the value of crap even if the SIV doesn't sell the crap to the fund. I exaggerate concerning the 90% but don't be surprised if it is by much.
Who are they fooling? There will of course be an agreement that none or very few of the holders of the crap actually sell it to the fund. This artificial valuation of garbage is another scammy way to avoid FASB 157, but one I don't think even the dumbest CPA or regulator will allow.
More shenanigans. The financial institutions are setting up their own artificially valued index which will bear no relationship to market values. If they were playing by market values, this silly contraption would not be necessary. They need to own up to the value of the garbage they issued, take a financial enema, and start fresh. |
