BERNANKE: Well, Senator, it {the Super-SIV} all depends on the execution, as
I'm sure you would agree.

My understanding of the idea behind it is that a consortium of banks, together with investors, major investors, would oversee the process of purchasing high-quality assets from these unwinding sieves and then create a new vehicle which would then be financed by commercial paper, you know, purchased by, for example, large mutual funds, for example.

So my understating of the process is that, because investors, as well as a number of banks, would be involved essentially as gatekeepers in bringing assets into this new vehicle, that the valuations -- there would be an incentive, particularly on part of the investors, but also in terms of banks who didn't have direct exposures, there would be an incentive to create accurate market pricing.

If that is the way it works -- and, again, you know, it depends on the execution -- but if that's the way it works, it would remove some overhang from the market, it would create a stable financing source for those assets, and it ought not to be inconsistent with the price discovery process.

A senior Federal Reserve official said the central bank’s silence on the Master-Liquidity Enhancement Conduit – or super SIV – has been “misconstrued” as opposition or lack of support for the proposal.

“The silence has been misconstrued,” the official said. “The proposal looks reasonably well designed and has the potential to contribute – rather than to impair – improvements in these markets and the process of price discovery.”

William Poole, president of the Federal Reserve Bank of St. Louis, says credit markets show “evidence of a healing process underway” but one that is still “very incomplete.”

....

The investment fund being organized by top U.S. banks — the so-called super-SIV to prop up the mortgage-securities market — is “an effort to promote some better price discovery of what those assets are really worth,” Mr. Poole said. “I don’t know enough about it and I don’t know whether it’s actually going to work or not. … But it’s the kind of device that you would expect the markets to create — some devices to start moving toward normal.”

In an interview with the Wall Street Journal