Citigroup to Bail Out Struggling $49B SIVs

Citigroup reverses course; Moody's downgrades its credit rating

By Jim O'Neill, Newser Staff

Posted Dec 14, 2007 7:20 AM CST

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Citigroup to Bail Out Struggling $49B SIVs — A Citibank office is shown on Tuesday, Nov. 27, 2007 in New York. Wall Street rebounded Tuesday after the Abu Dhabi Investment Authority said it will invest US$7.5 billion in Citigroup Inc., a vote of confidence for the nation's largest bank, which has suffered severe losses amid the ongoing crisis... (Associated Press)

Citigroup will take over seven subprime-plagued investment funds, with $49 billion in assets, and provide emergency support if necessary, to keep them solvent, the Wall Street Journal reports. The decision yesterday to bail out its affiliated SIVs—structured-investment vehicles—is a reversal of Citi's earlier decision to keep them off its balance sheet, and it led Moody’s to downgrade Citi’s credit rating.

The move, which came just two days after new CEO Vikram Pandit took over, likely spells the end of an industry effort, backed by the Treasury Department, to create an SIV rescue fund. Citigroup and several other banks decided they couldn’t wait for the slow-moving plan to develop. (More Citigroup stories.)

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