I suppose by moving it to MLEC it clears maybe some of their Reserve Requirements and thus enables them to look for new "business opportunities" ? http://www.federalreserve.gov/monetarypolicy/reservereq.htm
The major point here is to create a fund that can purchase these debt instruments at 'market' - i.e. inflated prices. Once this is done, it creates a price and allows for the hedgies and other holders to MTM (mark to market) these investment vehicles without additonal loss. Frankly, expect a rise in ABX securities. Credit crisis solved. And much like that german entity, no one expects this toxic debt holding company to make any money. It will allow for temporization and stabilization. Good idea, IMHO, under the circumstances. Golden snax to be on the bid, of course and then the offer to provide liquidity.
the whole thing is bullshit... Citi is setting up a fund to buy no bid paper from itself..... price fixing at best....
I said to read through it, read between the lines. "Several rounds of discussions followed â in Washington, New York and on conference calls â led by two senior Treasury Department officials: Robert Steel, the under secretary for domestic finance and a former Goldman Sachs executive who is a close adviser Mr. Paulson; and Anthony Ryan, a former investment banker who is now assistant Treasury secretary for financial markets. " If you're not aware, Mr. Paulson is former Goldman as well as his advisor Mr. Steel. If they don't try to patch the problem, Goldman could lose billions and we cannot let that happen! What would this world be like without Goldman!?!
Same thoughts as you. Can't sell the problem bonds and notes, because there are no bids....so lets set up a NEW investment pool to buy the debt that no one wants.....and let's do that by issuing MORE notes and bonds to buy the notes and bonds nobody wants. Only on Wall Street can you get away with this! Now I wonder.....are those three banks going to do the same for the individual investor that may own some of the effected debt...let me think hmmmmmm....uh.....no
This is all about psychology. The actual sub-prime problem is miniscule... But market psychology fueling a LIQUIDITY CRUNCH is more dangerous. As long as this sh*t keeps trading... There is absolutely no threat to the markets or economy.