The $75 billion SIV will be up and running by the end of the year, sponsored by Citigroup, Bank of America and JPMorgan. They'll be looking for some cash from another 65 banks. Word is they'll now take just about anything in this SIV. The next step is for the Central Banks to intervene in the currency markets, to support the dollar.
Citigroup (C 33.10) and Washington Mutual (WM 20.51) are buys on this news. My brother, whose idea of excitement in the market is trading Berkshire Hathaway B's, Thursday sold his GLD at 83.40 and used the proceeds to buy C at 31.41, showing that the panic (ie stupidity) on Wall Street has not spread to the Midwest.
The banks are already moving assets. Look at their balance sheets. The tremendous growth in assets held for investments, from assets held for sale indicate this. The difference? Assets held for investment don't need to be written down like the assets held for sale. So move them. The bears will scream at this, and say it's accountant chicanery but they are wrong. The prices now, are not "real world" pricing, even though these prices exist at this moment in time. AAA at 75%, and AA paper at 50% that are still paying, need another look. But the short position is so great in this area, that the hedger's need this inventory. And they want the smaller banks to panic, so the larger banks have to mark down their paper. Now the banks just have to move assets to the SIV.
With the SIV in place, FASB 157, that comes into place November 15th, won't be the knockout blow that the bears thought. The rally in the financials will cause the shorts to cover. It's the same story that happened last week with the mortgage insurers.
Friday, PMI rallied $3.77 to $14.88, and MTG rallied $2.94 to $21.30 on news that insurer Old Republic had taken an 15% and 11% stake respectively. The stocks rallied despite a certain market pundit screaming that they were going out of business. That was the first step. Lock up stock and create stability in the market to engender confidence. Now look for giant buyers to step in the financials this week.
So buy them!