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Bailout for SIVs said to be unneeded

Restructuring, balky investors put plan on hold

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Associated Press / December 22, 2007

NEW YORK - The banks trying to form a bailout of troubled structured investment vehicles yesterday said the fund is unnecessary at this time, amid speculation that investors were reluctant to participate.

JPMorgan Chase & Co., Bank of America Corp., and Citigroup Inc. - at the behest of the Treasury Department - have been working since September to set up the fund. Money raised would have been used to buy assets from the SIVs, that have been hurt during the credit crisis.

There had been widespread reports of little interest from investors - including other banks - to put money into the fund. SIVs use proceeds from the sale of commercial paper and other short-term debt to buy higher-yielding assets like subprime mortgages. But the credit crisis has made it almost impossible for most SIVs to roll over the short-term debt when it comes due.

Demand for the SIV rescue has waned in recent days as the banks that control them have begun to restructure them. Citigroup last week moved $49 billion of SIV assets to its own balance sheet.

But, the banks said this week that the fund was on track to be set up. Money manager BlackRock Inc. had been selected to manage the fund.

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