Master Liquidity Enhancement Conduit
The Master Liquidity Enhancement Conduit (MLEC), also known as the Super SIV (
Because of a tightening of the credit markets linked to the crisis, a number of
The credit crunch, along with pricing difficulties resulting from the mark-to-model process, caused fears that the SIVs might be forced to sell off their assets at "fire sale" prices, far below their stated value. The resulting flood of bargain-priced asset-backed securities could havefurther destabilized the credit markets and perhaps forced the parent institutions to place the SIVs on their balance sheets, indirectly reducing the amount of money the banks could loan.
The Master Liquidity Enhancement Conduit was intended to facilitate the short-term refinancing that these SIVs required, thus avoiding the risk of a self-reinforcing downward spiral in the ABS markets.
Some considered the Conduit a privately funded way to bail out large financial institutions that had made bad bets in the housing market. Part of this criticism resulted from Citigroup's involvement, as Citi had the largest exposure in SIVs, and there was some concern that the scheme would only delay problems, not lead to solutions.[3]
The
On October 19, 2007, Wachovia and Fidelity joined in the creation of the Conduit.[6]
On 21 December 2007,
References
- ^ Gillian Tett; Krishna Guha; David Wighton (2007-10-14). "Banks agree $75bn mortgage debt fund". Financial Times. Retrieved 2007-10-21.
- ^ Mark to Model
- ^ Kathleen Pender (2007-10-16). "Bank bailout plan doesn't solve underlying problem". San Francisco Chronicle. Retrieved 2007-10-21.
- ^ Mark Pittman (2007-10-15). "Citigroup, Bank of America Plan $80 Billion SIV Fund". Bloomberg. Retrieved 2007-10-21.
- ^ Stracia (2007-11-08). "Cartel Blanche". Stracia. Retrieved 2007-11-25.
- ^ Glenn Somerville (2007-10-20). "Paulson says banks credit rescue fund market-driven". Reuters. Retrieved 2007-10-21.
- ^ Banks to abandon 'Super-SIV' fund, CNN.com, 21 December 2007