With the three largest U.S. banks reaching agreement on a new $80 billion fund aimed at reviving the market for short-term debt, criticism appears to be mounting that the new fund itself may be flawed or may create more problems than it solves.
Citigroup (NYSE: C), the Bank of America (NYSE: BAC). and JPMorgan Chase (NYSE: JPM), the three largest U.S. banks, have reached an agreement on the structure of an $80 billion fund to help revive the market for short-term debt, a person familiar with the talks said, Bloomberg News reported.
The banks want to establish the fund, called the "Super SIV" or master liquidity enhancement conduit ("M-LEC"), as a way to obtain short-term credit to finance high risk / high-yield investments in subprime mortgage loans. The fund would buy some of the $320 billion in assets held in structured investment vehicles, or SIVs. SIVs typically borrowed money to invest in longer-term investments, like subprime mortgages.
Citigroup (NYSE: C), the Bank of America (NYSE: BAC). and JPMorgan Chase (NYSE: JPM), the three largest U.S. banks, have reached an agreement on the structure of an $80 billion fund to help revive the market for short-term debt, a person familiar with the talks said, Bloomberg News reported.
The banks want to establish the fund, called the "Super SIV" or master liquidity enhancement conduit ("M-LEC"), as a way to obtain short-term credit to finance high risk / high-yield investments in subprime mortgage loans. The fund would buy some of the $320 billion in assets held in structured investment vehicles, or SIVs. SIVs typically borrowed money to invest in longer-term investments, like subprime mortgages.
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