SIVVE-MAE: The bailout plan and what I think of it

[GRG55]

Re: SIVVE-MAE: The bailout plan and what I think of it

Well, well. Apparently it's time to give Greenspan a rest and train the gunsights on a new target...

Paulson's Focus on Subprime `Excesses' Shows His Goldman Gorged

Nov. 5 (Bloomberg) -- Treasury Secretary Henry Paulson says the U.S. is examining the subprime mortgage crisis to ensure that ``yesterday's excesses'' aren't repeated. He could be talking about himself and his former firm, Goldman Sachs Group Inc.

Paulson, 61, doesn't mention that Goldman still has on the market some $13 billion of almost $37 billion in bonds backed by subprime loans or second mortgages that it created while he was chief executive officer. Those bonds have an average delinquency rate of almost 22 percent, higher than the average of other subprime bonds from the period, according to data compiled by Bloomberg...

...``He should admit to having been involved in creating the problem that we have now,'' said Representative Brad Miller, a North Carolina Democrat, who introduced a bill Oct. 22 to make firms packaging subprime mortgages liable for bad loans in some circumstances...

...``I can't help but notice that when middle-class homeowners were losing their homes to foreclosure, he was pretty nonchalant about it,'' Miller said of Paulson. ``But when Wall Street CEOs start seeing trouble in their absurdly complicated financial instruments built on the mortgages of middle-class homeowners, he feels their pain.''...

Link:
http://www.bloomberg.com/apps/news?p...oaM&refer=home

[GRG55]

Re: SIVVE-MAE: The bailout plan and what I think of it

Here it comes...

From the WSJ:

SIV Rescue Plan Faces New Pressure


By Carrick Mollenkamp and David Reilly
A rescue plan for investment funds that are one source of credit-market concern is under new pressure after Moody's Investors Service said the funds were liquidating assets to meet financial commitments....

In its report, Moody's said it had cut, or might cut, ratings of the debt issued by the funds. Moody's said certain SIVs owned assets with deteriorating values. Some SIVs now could hit financial triggers that would speed up asset sales. Such sales could drag down the prices further, including those of securities to U.S. mortgages, when prices already are low.

Moody's, in its report, said it now assumes SIVs would be liquidating assets at distressed prices to pay off financial commitments given the problems SIVs face in issuing new debt or refinancing maturing debt.

The breakdown of SIVs is one of a number of concerns paralyzing global credit markets since this summer. In a separate report yesterday, Citigroup said the world's biggest banks could face write-downs totaling $64 billion because of exposure of securities tied to subprime loans.

The Moody's moves yesterday will put more pressure on the banks behind the plan, first announced last month, to form a supersize fund to buy some assets from the SIVs. Without the fund in place to purchase assets from the SIVs, they will be more likely to begin selling off assets at whatever prices they can get to raise money for payments they need to meet to investors who have purchased their commercial paper.

"They are going to have to sell at some point," said Douglas Long, an executive vice president at London-based Principia Partners, which provides technology support for structured-product managers. "It's not looking pretty."

Yesterday, Moody's downgraded, or said might downgrade, debt issued by 16 SIVs. The ratings agency cited the deteriorating value of the assets in the SIVs, which hold $33 billion worth of debt securities.

The SIV market is made up of about 30 funds that own some $300 billion in assets. Investors stopped buying debt issued by SIVs earlier this year; they worried that the SIVs could hold assets linked to subprime mortgages and thus could have trouble repaying debt.

Moody's said it wasn't taking the ratings actions because of the quality of the assets in the SIVs. Instead, Moody's said the SIVs problems stemmed from the drop in the market value of the assets the SIVs own as investors shun those investments amid the credit crunch.