Prince has vacated his throne - and left a mess!

After Prince, more problems for Citi

Excerpt:

The big wild card in the Citigroup saga is what happens now with its large, shadowy bond funds that the credit crunch has hurt. Citigroup's so-called structured investment vehicles (SIVs) - which have approximately $80 billion in assets - are kept off the balance sheet and are having trouble because investors stopped buying the notes they issued to fund their investments.

Other banks, along with the Treasury Department, are trying to set up a new, bigger SIV that would effectively stop the other SIVs from going into liquidation. The Wall Street Journal reported Friday that the Securities and Exchange Commission is looking into whether Citigroup has been accounting correctly for transactions it has done with its SIVs. A Citigroup spokeswoman was quoted in the Journal saying the bank is confident that it has accounted for its SIVs correctly. But, conspicuously, Citigroup didn't mention its SIVs, at least explicitly, in the Sunday press release on losses.

If the SEC review does find irregularities with the SIV trading, there's a chance Citigroup would have to reflect at least some of its SIV exposure on its balance sheet. Because of the doubts about Citigroup's capital strength, any move to reflect the SIVs on the balance sheet could deepen worries over the bank's financial footing. However, other analysts believe Citigroup has adequate capital to deal with an SIV shock and more losses from mortgage-related assets and bad loans.


Wikipedia: Structured investment vehicle (SIV)

Wikipedia: 2007 Subprime mortgage financial crisis

Comments: I had never heard of a SIV until this article! Wikipedia: 2007 Subprime mortgage financial crisis provides a good overview of Subprime issue. "C"