Ben Bernanke’s Credit Plan Failing; Citigroup Brings SIVs Home

“We’ll come in low out of the rising sun and about a mile out, we’ll put on the music.”

In “Apocalypse Now,” Lieutenant Colonel Kilgore explains to his surfing buddy Lance the plan of attack for the airborne cavalry of helicopters. It’s one of the most famous scenes in a movie so famous it’s almost become a cliché. The helicopters come in blasting Ride of the Valkyries by Richard Wagner.

You can watch the scene here:

Who knew Ben Bernanke had friends with helicopters.

Bernanke’s plan to restore confidence to the world’s credit markets is not faring well. Technical measures, like the rate banks charge each other to loan money, keep creeping up. But the most visible example of shaken investor confidence is the tepid response of global stock markets.

And can you blame them? The concerted action by central banks to open their wallets has left investors wondering, “Well just how bad is it if the Fed is begging banks to borrow money?”

If there are any distressed financial institutions that fear the stigma of borrowing money from the Fed in such public fashion, well…they are keeping quiet. Confessing is something you do in dark wooden boxes in cool drafty churches in a soft murmuring voice. Needy borrowers apparently still feel the need to wear dark sunglasses and a baseball cap when borrowing from central banks. The shame of it.

And what’s this? Flashing across our desktop is news that Citigroup (NYSE:C) has decided to bring its cash-strapped SIVs back home to the balance sheet.

The Wall Street Journal reports that, “The move could be the death knell for an industry-wide effort to create a rescue fund for the SIVs. Since September, Citigroup, Bank of America Corp. (NYSE:BAC) and J.P. Morgan Chase & Co. (NYSE:JPM) have been working to develop the fund, which was urged by the Treasury department. Although the banks have been pursuing the plan, interest has waned in recent weeks as other financial institutions began to solve their own SIV problems.”

Is this a solution? We have no idea. What is notable is that the SIVs Citi is bringing back on the balance sheet have assets of US$49 billion. That’s down from US$87 in August. Either assets have been sold or marked down…by US$38 billion.

Dan Denning
Markets and Money

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.

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2 Comments on "Ben Bernanke’s Credit Plan Failing; Citigroup Brings SIVs Home"

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Do you want to see something really scary? Go to youtube ( and type in the search box the words great depression. Then watch the 7th video on the list- it is titled: The Great Depression ( You will freak out how scary it is. It shows an actual video of outside the actual stock market in America in 1929 while the stocks were actually crashing, on the actual day the great depression started. It shows all the people who quickly went down to the stock market to try to take their money out before it vanished. Look how panicky… Read more »
Coffee Addict
Many investment banks can argue that by unloading toxic debt to investors they also unloaded the risk. These banks consequently have no need for any special funds, measures or internal accounting treatments. Foolish investors will bear any losses. SIVs with bank issued guarantees or protections need to be booked to the balance sheet. So do direct investments by the bank controlled entities that issued the debt. Otherwise forget it – it isn’t going to happen because it doesn’t have to! The global economic risk associated with some SIVs is far bigger than Citbank’s relatively small markdown. Thus the concern of… Read more »
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