An MLEC In PIIGS' Clothing: The Latest Greek Bailout Proposal Picks Up Where the Super SIV Failed

Tyler Durden's picture

Confused about the latest attempt by an insolvent French banking cartel to sugarcoat what they are doing in Greece? Don't be. After all this is nothing but a repeat of a failed idea first floated back in October 2007, when a Super SIV was supposed to shore up the hundreds of billions of toxic subprime debt while packaging it in a tidy off-balance sheet little packet. Presenting the MLEC part deux. And yes. Back then the idea crashed and burned because it was understood it would be a total disaster. If it passes beyond the production stage this time, it really is game over for the ponzi extend and pretend brigade.

From Wikipedia:

The Master Liquidity Enhancement Conduit (MLEC), also known as the Super SIV (structured investment vehicle), was a plan announced by three major banks based in the United States on October 15, 2007, to help alleviate the subprime mortgage financial crisis. Citigroup, JPMorgan Chase, and Bank of America created the plan in an effort to stave off financial damage.[1] Due to a tightening of the credit markets linked to the crisis, a number of structured investment vehicles (SIVs), backed by major banking institutions, found themselves less able to obtain short-term financing on the open market,
which they need in order to ensure their continued operations, due to
investors concerns about the SIVs exposure to subprime mortgages.
Complicating the problem was the fact that some of the investment
securities held by SIVs are valued by a computer model[2] developed by the securities traders and investment banks. The mark to model
process is used by all financial instiutions where a deep and liquid
market does not exist. Many of the securities' valuations can be found
in the company's financial report as illiquid and hard to value level 3 assets.

The credit crunch, along with pricing difficulties resulting from the
mark to model process, caused fears that the SIVs might be forced to
sell off their assets at "fire sale" prices, far below their stated value. The resulting flood of bargain priced asset-backed securities
(ABS) could further destabilize the credit markets and perhaps force
the parent institutions to place the SIVs on their balance sheets,
indirectly reducing the amount of money the banks could then loan.

The Master Liquidity Enhancement Conduit was intended to facilitate
the short term refinancing these SIVs require, thus avoiding the risk of
a self-reinforcing downward spiral in the ABS markets.

Some considered this a privately funded way to bail out large
financial institutions that made bad bets in the housing market. Part of
this criticism resulted from Citigroup's involvement, as Citi has the
largest exposure in SIVs, and there was some concern that MLEC would
only delay problems, not lead to solutions.[3]

The United States Department of the Treasury played a significant role in the idea of the formation of the fund. Treasury Secretary Henry Paulson championed the idea, with Under-Secretary for Domestic Finance Robert K. Steel taking the initiative in bringing the banks together for the plan.[4]
Others questioned the legality of fund participants' ability to work in
concert, supporting price discovery in certain illiquid positions held
by the SIVs, in light of United States antitrust law.[5]

On October 19, 2007, Wachovia and Fidelity joined in the creation of the MLEC.[6]

The value of the fund was projected to reach as much as $400 billion worth of investment securities.[citation needed]

On 21 December, 2007,
reported that the Super SIV fund plan was being abandoned, and that the
banks had stated the plan was "not needed at this time".[7]. A number of private banks pledged to support individual SIVs. In February 2008, Standard Chartered, soon after promising support for the Whistlejacket SIV, abandoned the fund. Orange County, California has $80 million invested in Whistlejacket.

h/t Paolo

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Ancona's picture

Too funny!

The frogs are just as insolvent as Greece. A Greek default would expose their balance sheets for what tehy are......insolvent.

Bindar Dundat's picture

Collapse you dumb bastards...Collapse... end your drama and give us some great opportunities to steal , I mean invest.

I love the smell of financial suicide in the morning....

RobotTrader's picture

Heh, check out gold.

What a joke.  Margin calls rolling in.

plocequ1's picture

DXY, Gold and oil down. Stocks up. Damn, How did they do that? Must be that new and improved software

Boston's picture


Check out silver, 33 bucks and counting.  Bring on $30, and better yet $25, so I can back up the truck and buy, buy, buy (on this dip)!


T-NUTZ's picture

Clowns like you will be schooled.

hugovanderbubble's picture

Thanks Paolo,


I remember Societe Generale turning machines to sellers at dec 2007 with alevosy...

Robslob's picture

I have an idea!

Let's take all the PIIGS combined debt....load all of it into a rocketship...and shoot it into outerspace where it will never be seen again...!

I think this could work.


Cole Younger's picture

To much space junk as it is.

slewie the pi-rat's picture

We The People = The Ultimate Bad Bank BiCheZ, BiCheZ

orca's picture

I think it will work. You have to think 2.0 here, with a psychopatic mindset, but it could work.
Everybody and their sister has been focussing on ECB, EU and IMF. This is a global problem. If yuou can bring in the Arabs and Chinese and Russians, for whom these amounts are pocketchange, and you deposit the whole heap of shit in an SIV to be never looked at again (zero coupon to January 2888), you rape the CDS buyers and shorters, protect your "wealth" (suppose eacht side pays EUR 30bn in, that's less then 1% of Arab exposure to a market meltdown), and you do the same with Portugal, then there's no one left to attack Spain. That was the setup all along, especially Sarkozy, who hates CDS and shorters. Win-win: Arabs get to preserve wealth, China continues to export and gains international influence, and the Russians will cooperate if berlusconi asks them nicely.
Additional bonus is you kill off al semblance of normalcy in such a way, that abnormal will become the new normal.
So yes, I think it could work and they will try it.
Money is not a astore of value any more but a tool to a political mean. No escape possible, except for precious metals. Soooooo the next step is to ban them (force majeure Comex) and we will have gone full matrix.
By the way, in the open I have gone long NBG, the ultimate bankrupt bank from Greece, on the assumption this "solution" will work
Minsky here we come!

Catullus's picture

Sounds like a sterilized Brady bond vehicle. Put in SIV to prevent EOD while front loading the interest payments. It doesnt matter in a few years anyway.

glenlloyd's picture

garbage in garbage out

agrotera's picture

...ah yes, the super sieve (this siv, structured investment vehicle--SIV may be the acronym, but sieve is the meaning)--sorting out and relieving the people of their valuables--as the great unwashed and civilized alike flow right through relieved unwittingly, of their hard earned money and posessions..

chump666's picture


Greece is a c-hair away from giving the kiss of death to the EZ, this vote will be an almighty flop, protests, chaos and the major pain trade