A Fishy Story of the MLEC- aka- the Toxic Waste Fund

You've probably heard all about it now. The US Treasury of Hank Paulson is encouraging Citibank, B of A, and a few others to form a massive SIV (Structural Investment Fund) to take all the crap from the other SIVs, and somehow recycle it all and make it all good news. Even for a bunch of enron-style Wall St. criminal, it seems like the impossible dream.

While Citigroup, J.P. Morgan Chase, and Bank of America maneuver to gather cash commitments for their proposed structured investment vehicle (SIV) superfund--the Master Liquidity Enhancement Conduit (MLEC)--from U.S. and foreign banking suckers, there has been a flurry of counter-attacks by heavy hitters within the the financial sector. Even Former Fed Chief Alan Greenspan has questioned the usefulness of the MLEC superfund scheme, quoted in the Oct. 20th Financial Times (of London).

Warren Buffet's point is if the mortgages behind the MBS are going to crash, it is the way it is anyway. See an interview to Rupert Murdoch's new media outlet Fox Business Network in its debut on Oct. 18, where he declared that "pooling a bunch of mortgages, changing the ownership" would not change the viability of the mortgage instrument itself. "It would be better to have them on the balance sheet so everyone would know what's going on."


Financial commentators both in print and online media ranged from skeptical to outraged by the collusion of the banks and the so-called regulators, to bail out the rapidly devaluing SIVs by giving them a face-job and a new wardrobe, then lending money to "lure" suckers to buy the toxic wares. The FT even blamed the plunge in the stock markets in recent days partly on investor "unease" exacerbated by news of the MLEC scheming.

Undaunted, Treasury Secretary Paulson declared at the Oct. 19 G-7 meeting, that the superfund would go forward, and be in place by the end of the year. So the big question, is who is doing what to whom?