A new Finance Round-Up has been posted at TOD:Canada.

A bailout of sorts appears to be underway for the Enron-esque off balance sheet financial conduits known as Structured Investment Vehicles (SIVs), similar to the on-going Canadian attempt to rescue frozen Asset-Backed Commercial Paper (ABCP). However, the US Treasury-supported use of Frankenstein finance to bail out the effects of past Frankenstein finance smacks of desperation rather than inspiring confidence.

Something had to be done to forestall a looming firesale of assets that none of the banks want marked to market, but 90 days may well be too long to wait when a crunch period is fast approaching, and $100 billion may not be enough. With problems emerging for both commercial real estate and consumer spending, as well as ARMs resetting, all on top of the SIV/ABCP deepfreeze, it's hardly surprising that this rescue plan has been described as "rearranging the deck chairs on the Titanic".

New! Master-Liquidity Enabler Conduit

S&L may yet be eclipsed. "The cost of the subprime crisis continues to mount on Wall Street. To date, the total stands at nearly $20 billion." (CNNMoney.com) Other estimates go far higher, dwarfing the S&L's $125 billion. "Ultimately, the total cost to ride out the storm would be more than any consortium of banks could afford." (USA Today)

The latest "Super-SIV" emergency financing scheme is an effort to enable the continuation of the credit binge. Some of the world's biggest banks plan to put about $100 billion in a fund that will be used to replace the investors who have stopped buying SIV-affiliated commercial paper.

"Details are still being worked out but the oversight committee of the three banks [Citigroup, J.P. Morgan and Bank of America] will set criteria for what the new fund, to be called the Master-Liquidity Enhancement Conduit, will buy." (Wall Street Journal)

If investors don't want the stuff, banks have to put it on their balance sheets and take the loss unless they can find another buyer, which it appears they intend to create.

Mary Shelley would be proud. Where did I leave my pitchfork?

This effort looks eerily similar to 1929, when the Rockefellers and William C. Durant pooled capital to buy large quantities of stocks to demonstrate their confidence in the markets to the public. The crash continued and the market lost $30 billion that week, ten times the annual budget of the federal government and more than the U.S. spent in World War I.