Citi cuts assets of sponsored SIVs by $17 billion

Ok class, it's quiz time: did you catch the subtle propaganda of this article?

No? The answer is twofold. First, Citigroup's retreat from SIVs is hardly an immediate positive: "cutting" that $17 billion of exposure requires selling at a loss (probably steep) or bringing the risk back onto the bank's balance sheet (which, if you believe the assets were overvalued at all, just means there will be a loss eventually).

Second, Citigroup still has a gargantuan $66 billion of SIVs, the remainder of which is being downgraded or (likely) soon will be, as the article mentions and as we reported earlier. The downgrades effectively mean there will be steeper-than-previously-assumed losses on that other $66 billion.

You simply can't bail this toxic bilge out of the ship without hurting for it.

Now, this all many not sink Citi immediately; but we have to wonder just how much toxic exposure Citi's Arab sugar daddies are going to be willing to take on. For their part, we hear the Chinese are turning "inward" with their sovereign wealth fund...