November 27th, 2007
For Tax Year 2007 I Will Not Be Bringing My Schedule C Income Onto My Balance Sheet
Via Atrios…
From CNBC: "Citigroup will not be bringing its SIV assets onto their balance sheet."
SIV = Structured Investment Vehicle. The Wiki article isn’t bad…go read it for some insight into why big capital is getting anxious about what’s happening now due to the sub-prime mortgage collapse. Basically what Citigroup is trying to do here is a little creative Enron style shell company book keeping in the hope of propping up their market value. Oh no…those aren’t Our worthless assets…they belong to that company over there…er, the one we created to hold those worthless assets… What’s…astonishing…is how brazen they’re apparently being about it.
And you thought the stock market was the only form of gambling Wall Street did. Oh goodness no…
November 28th, 2007 at 3:07 am
It sounds like *exactly* the business model of Northern Rock, the British bank that almost collapsed a couple of months ago because of the sub-prime crisis.
NR’s primary business is mortgages – i.e. long-term loans financed with short-term loans from other banks. When the sub-prime crisis hit, other banks stopped lending as much money out, so NR had to repay money they didn’t actually have immediately available. NR was eventually forced to go to the Bank of England for an LOLR (Lender-of-Last-Resort) loan; this left them in a poor position since BoE LOLR loans are at punitive rates, several points above market rates.
NR’s secondary business is private savings (roughly a fifth of its source of mortgage funds), and when the public found out about the LOLR, most people who had savings with them trotted off to make transfer their savings elsewhere. One of NR’s competitors (another former Building Society) saw its savings business almost double in size! As a result NR’s remaining financial “cushion” was almost wiped out in a matter of days.
November 28th, 2007 at 10:44 am
You know, it’s really scary watching this sub-prime fiasco running through the economies of the rest of the world like an outbreak of flu…
November 28th, 2007 at 5:27 pm
Right now I’m just glad I don’t have a mortgage (and that precious few others in my family do either)
November 28th, 2007 at 10:41 pm
Here in the states, some renters are finding themselves out on the street because of the sub-prime meltdown. A lot of houses that are going into foreclosure were bought not to live in, but as investments that were rented out. The owners are defaulting, and now the renters are without a place to live because (in most states over here) a judgment of foreclosure immediately terminates all the rights of the renter.