Industry News

Banks band together to bring billions to credit market

Treasury Department endorses plan for new fund

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Several major banks are working together to establish a multibillion-dollar investment fund intended to lessen the credit crunch by improving liquidity for mortgage securities and other investments. The U.S. Department of Treasury facilitated discussions among the group of banks and investment managers, according to a Bank of America announcement today. Bank of America Corp., Citigroup Inc. and JP Morgan Chase & Co. are among the group of banks that are setting up the fund, which could be worth up to $100 billion, according to some reports. Bloomberg reported that securities losses related to subprime mortgages led investors to retreat from high-risk assets, and structured investment vehicles that issued commercial paper to buy the securities "found they could no longer roll over the debt, forcing them to sell about $75 billion of their assets." The intended beneficiaries of the planned fund, according to the Bank of America announcement, are structured investment vehic...