The Smell Test

CBS Marketwatch reports: HSBC to provide $35 billion in funding to SIVs.

HSBC Holdings on Monday said it would move two of its structured investment vehicles onto its balance sheet and provide up to $35 billion in funding, saying it doesn't expect a near-term resolution of the funding problems faced by the vehicles that it and other banks operate.

The bank said it is providing up to $35 billion in funding, and its balance sheet will expand by $45 billion.

But the banking giant insists earnings won't be materially impacted, because existing investors will continue to bear all economic risk from actual losses. It added that the move won't impact capital requirements much, either.

"We believe that HSBC's actions will set a benchmark and restore a degree of confidence to the SIV sector, while providing a specific solution to address the challenges faced by investors in Cullinan and Asscher, the two SIVs managed by HSBC," the bank said in a statement.

Here's my interpretation:

HSBC blinked first. Citibank, Bank of America, and J.P.Morgan are currentily in the process of beshitting themselves.

From Bloomberg: Bank of America Takes Lead in Backing `SuperSIV' Fund.

Loomis Sayles & Co. declined to invest after receiving one of 16 invitations for a personal meeting last week with current Fed Chairman Ben Bernanke, said Daniel Fuss, who oversees $22 billion as chief investment officer at the Boston-based firm.

``It's so nice to get a personal invitation to go to Washington and have a one-hour visit with Ben Bernanke,'' said Fuss, who decided participating wasn't worth the risk to his firm. ``Oh, boy, did I feel important for about 27 seconds, and then you smell a rat.''

Bravo!!!