Citi moves $49B onto balance sheetTroubled financial giant will provide emergency support for its structured investment vehicles (SIVs) if no buyers are found for their notes, according to a report late Thursday.NEW YORK (CNNMoney.com) -- Citigroup, which has been pummeled by mortgage-related losses, will bring all of its $49 billion in structured investment vehicles onto its balance sheet, according to a published report late Thursday. The company will provide emergency support to the seven investment entities, which are funded by short-term notes, also known as commercial paper, said The Wall Street Journal. Several banks including Citigroup (C, Fortune 500), Bank of America, and JP Morgan Chase had considered forming a joint rescue fund for SIVs, according to the report. But that effort has lost momentum as banks increasingly are handling their own situations. The move is one of the first by new CEO Vikram Pandit, who's been brought on to refocus the troubled bank, according to the report. Bringing SIVs onto its balance sheet will put more strain on Citi's already troubled capital levels, said the Journal. An analyst research note quoted by the Journal predicted that such a move would force Citigroup to reduce its quarterly dividend payment to 30 cents from 54 cents next year. The analyst, Betsy Graseck, of Morgan Stanley also said Citigroup might have to issue new securities to raise capital, according to the Journal. A Citigroup spokeswoman declined to comment on possible dividend cuts or capital-raising plans, the Journal said. The first structured investment vehicle, or SIV, was created in 1988, and others quickly followed. SIVs issued debt in the commercial paper market, a short-term financing market. Then they used the proceeds to buy higher-yielding, long-term assets, such as mortgage-backed securities. In summer 2007, as panic spread through the market, investors shunned risk and stopped buying mortgage-backed securities, including notes issued by SIVs. |
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