November 8, 2007 (LPAC)--Moody's rating agency yesterday sounded the death knell for those strange, off-balance-sheet speculative creatures of the big international banks, called "Structured Investment Vehicles" (SIVs), sinking Hank Paulsen's crazy super-SIV bailout scheme, the Master Liquidity Enhancement Conduit (MLEC), in the process.

Moody's announced steps towards downgrading $33 billion of debt issued by 16 of the 39 existing SIVs. While the rating action immediately affects specific SIVs sponsored by nine international banks, the fire sale of assets and restructuring it triggers, kills the $350 billion SIV market as a whole.

Leading the list of bank SIV sponsors whose debt is to be downgraded is the already collapsing Citigroup, which set up seven SIVs carrying some $83 billion in debt.

The other banks affected are: Bank of Montreal, Germany's Dresdner Bank, HSH Nordbank, and WestLB banks, the Dutch-based Rabobank, France's Societe Generale, and Britain's Standard Chartered and HSBC.

In a follow-up conference call today, Moody's Paul Mazataud emphasized that "it seems clear that the situation has not yet stabilized and further rating actions could follow." Some SIV managers admit the market for SIV paper "has been permanently disrupted, and the SIV model will not survive in its current form," another Moody's analyst reported.

Moody's report described a continuous decline in the net asset value of these SIVs from mid-Summer, and continuing now. EIR research has concluded that this decline has already reached a level which should mean a mandatory shutdown and liquidation of some of these SIVs--forcing their bank sponsors to place their losses from these off-balance sheet operations, onto their own books. Moody's said its action came after it learned that some of the SIVs were already liquidating assets whose value was, at the same time, deteriorating. It assumes the SIVs will continue liquidating assets at distressed prices, being unable to issue new debt or to refinance.