Dec. 11 (Bloomberg) -- The tumor in the financial markets known as structured investment vehicles is shrinking, reducing the urgency for a bailout sponsored by the U.S. Treasury.
SIVs, which sell short-term debt and invest the proceeds in higher-yielding securities such as bank bonds and mortgage- backed securities, reduced their holdings by more than 25 percent since August to $298 billion, according to Moody's Investors Service. At least $84 billion more is being restructured by banks that set up the funds, according to data compiled by Bloomberg.
While Treasury Secretary Henry Paulson spends a third month gathering support for a ``SuperSIV'' that would buy assets from troubled funds, HSBC Holdings Plc, bond insurer MBIA Inc. and other companies are arranging their own rescues. The steps are diminishing the threat that SIVs will dump holdings and further roil credit markets contaminated by losses in securities related to subprime mortgages.
``Every day that goes by we are seeing more SIVs being reorganized to avoid a fire sale,'' said Priya Shah, a credit analyst at Dresdner Kleinwort Group Ltd. in London. ``The longer the SuperSIV takes, the less of a need there will be for it.''
Maybe I'm stupid, but reading this we come away with the following ideas. First, we all know that all of these assets are illiquid so we can't possibly put a price on them. Second we find that somehow these SIVs have "reduced their holdings." And they're "being restructured!" So somehow they're getting rid of the manure, but no one can put a price on it? Restructuring magically makes assets worth more money somehow?
All very strange.