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
Charles Prince, chairman and CEO of Citigroup Inc.   (Associated Press)
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(Newser) – 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."