Citigroup (NYSE: C), JP Morgan (NYSE: JPM), and Bank of America (NYSE: BAC) have finally set up a fund to make short-term loans to structured investment vehicles, many of which are run by Citi.

According to The Wall Street Journal, "the fund being assembled will buy certain assets from SIVs to prevent them from selling the assets at fire-sale prices." The fund still has not been approved by the banks' management.

But the problem is becoming more urgent. The FT says that "the fire-sale threat is mounting as more SIVs hit difficulties."

The thorny question is whether the fund is simply a mechanism to help Citigroup, which manages a number of these funds. Market watchers, including Alan Greenspan and Warren Buffet, have complained that the program puts an artificial net under structured investment vehicles. They argue that if SIVs have to sell their assets, the market will finally be able to see how bad the problem is and, hopefully, cope with it.

The fund may not even work, and free market supporters clearly think that would be a good thing. The New York Times quotes one expert as saying: "It is quickly being realized that it doesn't really solve the problems," said Joshua Rosner, a managing director at the research firm Graham Fisher & Company who had been skeptical of the proposal. "The path they have taken of skimming off the cream from the top doesn't resolve the fact there is poison at the bottom."

Such a shame to go to all of that trouble for nothing.

Douglas A. McIntyre is an editor at 247wallst.com.