Austria's Bond Issuer Agency Piles Up SIV Losses

Jul.15.09 | About: iShares MSCI (EWO)

Austria's series of bad headlines refuses to stop. According to a paper by the Rechnungshof, literally Austria's General Accounting Office, Federal Financing Agency OeBFA sits on 1.8% of all issued US Structured Investment Vehicles (SIV), counting so far €616 million of losses on a €4,92 billion portfolio. Now, don't be envious because of such small figures raising the eyebrows of the Rechnungshof. This is still €615 for every Austrian invested in subprime. On Tuesday the Rechnungshof criticized especially that the OeBFA had pumped half of its liquid funds into such papers.

The Rechnungshof did not attack Austria's Federal Financing Agency, but noted manifold that the OeBFA had not done any proprietary research on the SIVs bought, but had relied on the ratings of these papers. Well, we have discussed this issue here.

As the purchases of these SIVs were stopped on 2007, Austria's bond issuer can at least be credited with having ended such irresponsibilities before the onset of the credit crunch in August 2007. According to the Rechnungshof, most distressed SIVs had lost half their value before.

I am left one more time with the question of what statistics and news did they read?
On the other hand these losses fall into the era of finance minister Karl-Heinz "I have no ideology" Grasser who looted Austria's central bank to the tune of €4 billion in order to remain the country's most popular son-in-law.

In conclusion, Austria will survive this loss, dwarfed by an official banking rescue package of €100 billion, that may mushroom to €165 billion or €20,500 for every Austrian. These SIVs are only the tip of the iceberg that this country has yet to come to terms with.