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Sunday, December 2, 2007

Citi cuts assets of sponsored SIVs by $17 billion

November 30 2007
Citigroup Inc. said late Friday that it has reduced the assets of structured investment vehicles it advises by $17 billion in the past two months, as the banking giant tries to maneuver through this year's subprime thicket. Structured investment vehicles borrow short-term money by selling commercial paper and buying longer-term, fixed-income investments. The longer-term assets usually pay higher interest rates than the short-term debt, so they make money on the difference. Some of those higher-yielding assets were mortgage-backed securities and so-called collateralized debt obligations partly backed by subprime home loans. As the subprime crisis spread, SIVs struggled to refinance themselves because spooked money-market funds and other investors refused to buy more commercial paper from them.

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