At the instigation of the Treasury Department, some major banks are getting together to establish a fund of about $80 billion to shore up the commercial paper market, which is backed up by assets. They could announce the partnership as soon as Monday, October 15.
Those known to be involved are JPMorgan Chase & Co. (JPM), Citigroup Inc. (C) and Bank of America Corp. (BAC). Other banks are expected to contribute to the fund also.
What the fund will do is buy up assets from structured investment vehicles (SIVs). Banks use these to finance the purchase of a variety of assets, which includes subprime mortgage debt.
The reason it's being done, is an attempt to stop the banks from having to sell their holdings at extremely low prices, which could hurt the credit markets even more. Structured Investment Vehicles hold about $320 billion in assets at this time.
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» The Mortgage Crisis: SIVs and M-LEC from Pazdziernik II
Those who are conscious of financial and economic matters know that this summer a crisis of “sub-prime lenders” hit the United States mortgage market. I knew that bad mortgages were written and people bought homes they could not afford. At [Read More]
Tracked on: October 17, 2007 4:45 PM | Permalink to Trackback