Downsizing The Super-SIV

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The so-called Super-SIV is looking a little less super. The Wall Street Journal reported this morning that the SIVs sponsors are scaling back plains and now predict it might be cut down to half its intended size. Investor appetite has been scant, raising the possibility that the bailout SIV might not have enough assets to perform according to design. Some questioned whether $100 billion was going to be enough to bring life back to the market for SIV assets. Now that we're down to $50 billion the situation looks even bleaker. Add to this the fact that the plans still seem vague and no major investors have come forward to announce their support, and you might start to conclude that this thing might never really get off the ground.
Questions are also being raised about the claims that the Super SIV would only buy high-quality assets from the SIVs. With downgrades and steep discounts still tearing through the credit markets, it's not clear what exactly counts for a "high quality asset." We were told by one money manager who recently left a large institutional investor that there is widespread lack of confidence in the ability of the banks backing the Super SIV to properly assess the risk of various assets held by the SIVs.
"Actually, right now I'm tempted to say that 'high quality SIV asset' is an oxymoron," he said.
'Super Fund' for SIVs, Hoped for $100 Billion, May Be Half the Size [Wall Street Journal]

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