Super SIV Thoughts

Ok. The three largest banks with exposure to potential SIV liabilities are Citibank, JpMorgan, and Bank of America.
Let's look at their exposure (as of 09/07 according to Fitch) compared to their equity:

C: $90 billion exposure $63.5 billion equity
JPM: $78 billion exposure $67.2 billion equity
BAC: $58 billion exposure $61.1 billion equity

Other notables
State Street STT $28 billion exposure $4.6 billion equity
SunTrust Bank STI $9 billion exposure $9.7 billion equity
Zions Bank ZION $7 billion exposure $2.9 billion equity
see Fitch


You get the point
Any collapse in the assets that back the paper, and these banks must supply 'Credit Enhancement' which means that they must buy the assets. This could ruin the banks. ABX anyone?

Ok. Now, the Treasury department is 'sponsoring' a program to fix the SIV problem. Or should we say 'delay'? The program is headed by Citibank, JPmorgan, and Bank or America. The banks with the most exposure, are therefore creating a fund to rid themselves of exposure. The new SUper Siv fund will buy the assets from struggling Siv's, and then issue commercial paper to fund these purchases.

This is SIVs squared. This is like refinancing a home that has dropped in value, so that I can buy time and wait for it to appreciate back to the price I bought it at. Sound familiar?

A vicious cycle.

This will get interesting.