HowardThe Real Estate Crash, and Citigroup
September 6th 2007 13:11
Now there are rumblings over at Citigroup. There's a stock market crash on over the last few weeks, but is it real? Is it real estate? Well, there is the freeze up of the pyramid scheme behind it. The mortgages were turned into homogenized strips and sold off to Indian Rajahs, to Chinese Communist billionaires and so on. Now the housing market is going down 20-percent or more in some places. But THIS IS AMPLIFLIED BY THE CRASH OF MBS (MORTGAGE BACKED SECURITIES), in terms of real estate, the sub-primes and beyond, and much of it on credit which further amplifies the mess, but do the SIVs have HIV? The SIVs (Structured Investment Vehicles) are the entities in which the MBS are sold to, while being controlled by big banks. SIVs in turn are invested in MBS, derived from real estate and up the feeding chain.
Here is a good link on this and related issues. Here's another juicy morsel from the WSJ.
-Citigroup holds nearly $100 billion in Structured Investment Vehicles (SIVs), which it keeps hidden off-balance sheet, a very risky proposition, the Wall Street Journal revealed today.
The risky SIVs and closely related "conduits," have been blowing up, but a failure at Citigroup, the world's largest financial services institution, would strike at the heart of U.S. banking.
An internal Citigroup research report discloses that Citigroup's largest SIV is Centauri Corp, which by itself has $21 billion in debt. SIVs borrow short-term at a cheaper interest rate, and invest that money medium- or longer-term at a higher rate. They also use high "leverage," (borrowing).
Here is a good link on this and related issues. Here's another juicy morsel from the WSJ.
-Citigroup holds nearly $100 billion in Structured Investment Vehicles (SIVs), which it keeps hidden off-balance sheet, a very risky proposition, the Wall Street Journal revealed today.
The risky SIVs and closely related "conduits," have been blowing up, but a failure at Citigroup, the world's largest financial services institution, would strike at the heart of U.S. banking.
An internal Citigroup research report discloses that Citigroup's largest SIV is Centauri Corp, which by itself has $21 billion in debt. SIVs borrow short-term at a cheaper interest rate, and invest that money medium- or longer-term at a higher rate. They also use high "leverage," (borrowing).
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