Requiem for an Entity
With Citigroup’s decision to take $49 billion in assets held by off-balance sheet vehicles onto its balance sheet, the one ring to rule them all has been cast into the pits of Mordor.
Bankers and Treasury officials, several months ago, floated a plan that would essentially take a truckload of off-balance sheet vehicles and create an off-off-balance sheet vehicle (sort of like off-off-Broadway, both in terms of quality and credibility) designed, more or less, to buy time until everyone came to their senses and willingly and joyously bought a ton of this lousy debt that was sitting out there.
Except, it never happened — the broader market thumbed its nose at the idea. Prices on the various underlying securities continued to wilt, as the ABX indexes show. Meanwhile, the intention of this supercalifragilisticexpialidocious conduit (which, by the sound of it, was really quite atrocious) to only buy triple-A-rated debt was complicated by the fact that the credit-rating agencies woke from their slumber and began to downgrade the heck out of everything they could see. The triple-A debt left that was meant to be purchased by this Big Dig-esque structure became emperiled by the threat that, in time, it would be useless....MORE
