Do you agree Mr 21?

SPV’s and SIV’s (as they’re more commonly known in the US) are a perfect example of the inventiveness of modern banks. By using their superior financial knowledge they confuse and deceive the markets and increase their shareholders profits.

However, you say, just because you securitize something and break it up into tranches, that doesn’t necessarily improve it right? Who is going to invest in the lowest tranches, where the default and repayment risk is intensely concentrated. Wouldn’t these be a terrible investment and nearly worthless?

Of course not oh ye of little faith, this is big banks we are talking about!

Here is where things get really creative:
The newest financial product is to set up a SIV, then provide lower than market rate loans to allow people to invest in the products. Isn’t it perfect? Lending money to people to invest in your own bad loans. It creates a perfect circle with which to confuse everyone and make your senior executives and shareholders rich in the mean time!

It’s Off-off Balance Sheet!

The aim is to confuse everybody for long enough, that the market improves and you can cover these minor losses with huge profits generated from other legitimate money laundering enterprises, I mean well thought out strategies.

My conclusion is, these products seems to work pretty well, no ones been caught out so far, (except for some minor banks like Bear Stearns),so as long as my clients have investments in banks, I’m not complaining. (Just so long as they don’t invest in SIV’s themselves)