GOIH Capital Markets: Super Conduit

Why are these large banks setting up this off balance sheets structure to purchase toxic papers? The answer is if these banks had to take the assets back onto their balance sheets would require the banks to set aside reserves against the eventual default of the assets. If the banks are setting aside $85 billion, this can be leveraged 10:1 giving the buying power of $850 billion. Assume if the banks had to set aside 10% of the $85 billion would require reserve capital of $85 billion which it is doubtful if the banks could set aside this amount. There wouldn’t be any capital left to loan to businesses and individuals. Effectively shutting down the market and the large banks.