Citigroup Staves Off Fire Sale— for Now

Riskiest holdings safe through '07, but other banks are in trouble
By Jason Farago,  Newser Staff
Posted Oct 19, 2007 9:00 AM CDT
Citigroup Staves Off Fire Sale— for Now
Charles Prince, chairman and CEO of Citigroup Inc.   (Associated Press)

One of the central goals of the new superfund announced by Citigroup and other major banks is to provide a buyer for structured investment vehicles, the low-yield capital-raising investments whose demand has dropped like a stone in the credit crunch. Citigroup announced today its SIVs are covered until year's end. But as several European SIVs face turmoil, bankers remain cautious.

As demand for the mortgage-backed securities that SIVs purchased dissipated, banks have been forced to sell off their holdings at fire-sale prices. The new superfund, called M-LEC, should stave off the worst for Citigroup, the world's largest bank and the most exposed to SIV troubles. But nobody's happy about it: some graceless bankers have termed bad-news investments "SIV-positive." (More Citigroup stories.)

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