Executive Intelligence Review
Subscribe to EIR

PRESS RELEASE


As for Paulson's Last Great Scheme,
the `Super SIV'...

Dec. 6, 2007 (EIRNS)—A large number of the Enron-like "structured investment vehicles" (SIVs) set up by Citibank and other big money-center banks are going to face liquidation within a week or so, a financial expert told EIR on Dec. 5; and states such as Florida and Montana, and municipalities, which invested in these SIVs will lose big. The source said that the threat by Moodys Investors Service to downgrade SIVs with $105 billion in "assets," will be carried out by mid-December; at that point, the vehicles will either have to be taken onto the books of the banks that operated them—at cost of large losses to those banks—or liquidated at below fire-sale prices. Several other SIVs, set up by Citibank, Germany's IKB, and others, are already liquidating.

The $350 billion SIV "sector" is disintegrating, and Treasury Secretary Henry Paulson's Master Liquidity Enhancement Conduit scheme is coming far too late, and too little, to save it, the source said.

In addition, The Wall Street Journal reported Dec. 6 that the three banks assembling the "super fund" urged on them by Paulson—Citigroup, Band of America, and JPMorgan Chase—have scaled back their plans, because the other financial firms supposed to benefit from the plan, are unwilling (or unable) to invest anything in it, requiring their "rescue funds" for their own growing balance-sheet problems. As LPAC has previously reported, the Dec. 5 demand by the CEO of money-manager Legg Mason, for Paulson's U.S. Treasury to itself ante up $20 billion for the super fund, shows the inability to organize it from the crisis-wracked banks in London and on Wall Street.

The Journal confirmed that Citigroup's SIVs have already sold billions of dollars in assets, and that Citigroup will not agree to take these SIVs back onto its balance sheets. That might be fatal for the very shaky Citibank.

Lyndon LaRouche, the one economist for forecast the current financial crash, said today that Paulson's scheme is completely counterproductive, because "he has no comprehension of what he's dealing with. His scheme would make things worse, and he should abandon it, it's dying anyway. Don't let them sell this crap. Put the SIVs into bankruptcy," LaRouche said. "Establish an SIV quarantine."