It's all in the name(s)

Written by  //  November 14, 2007  //  Markets, Wednesday Nights  //  No comments

For those who have enjoyed the critical look at the subprime crisis offered by the Long Johns and who delighted in their comment that the success of SIVs was attributable to the fact that “They all have very good names”, we offer the following from the Editorial Board of the New York Times. For those who have not yet heard the Long Johns, Warning: they will reduce you to tears of laughter or possibly chagrin.

November 13, 2007
Wacky Wall Street

More than any of the nation’s other big banks, Citigroup is reeling from the credit squeeze brought on by the bursting of the mortgage bubble. Its write downs are estimated to reach some $20 billion by the end of this year.
A significant chunk of Citi’s overexposure to risky borrowing and junky mortgages comes from seven off-balance sheet investment entities – dubbed “structured investment vehicles,” or SIVs. At the time they were established, the bankers no doubt thought the SIVs were a good idea. Ditto the investors who piled in.
Like most crises, this one was foretold – by nomenclature. One of the minor revelations of the Enron scandal was that the off-the-books entities that helped wreck the Texas energy behemoth had goofy names like “Raptor I,” and “Jedi I” and “Jedi II,” ­and “Chewco.”
The names of the seven off-balance sheet “structured investment vehicles” that are now causing Citigroup so much pain? Beta, Centauri, Dorada, Five, Sedna, Zela and Vetra. (Sedna is an Inuit godess of the ocean, and the name given a few years ago the furthest known object in our solar system; Vetra is, among other things, the last name of a female scientist in the novel “Angels and Demons.”)
Beware of off-balance sheet vehicles with wacky names.

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