A Panic In Mortgage-Backed Securities? More Damage For Citi (C)?

The FT says that the "super-fund" to bail out financial instruments tied to mortgage-backed securities may be dead. Speaking about the fund to the paper: “As far as we can see, it appears dead in the water right now,” said one senior Wall Street banker.

Rating agencies Standard & Poor’s and Moody’s have received default notices for $5bn worth of the vehicles, known as collateralised debt obligations, giving holders of senior debt the right to sell assets.

The FT adds that "some observers fear it might now prove impossible to create the superfund quickly enough to help banks deal with the funding problems dogging SIVs – off-balance sheet entities that use short-term debt to fund longer-dated investments."

If the fund falls apart, watch for the level of write-off at Citicorp (C) to spike up sharply. If so, the Citi stock could go through the floor

Douglas A. McIntyre