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Mumbai:
Three biggest banks of the US, including Citigroup and Bank of America Corp, are
planning to create a fund to prevent the sell-off of billions of dollars of bonds
linked to subprime mortgages and other debt. The
banks are pooling around $80 billion to stave off the risk that certain investment
funds would have to dump assets at dirt cheap rates. Forced
sales could push debt prices lower, magnify bank losses from the credit crunch,
and make lenders even more reluctant to extend new loans. Tighter credit could
also jeopardise economic growth. Citi''s
SIVs held some $100 billion in assets at the end of August, making the bank the
largest sponsor of the vehicles in the world, while JPMorgan Chase and Bank of
America have had little involvement with SIVs. JPMorgan
Chase and Bank of America will receive fees for participating in the pool. HSBC,
one of the largest SIV sponsors, is considering joining the pool, a source said.
HSBC declined to comment. SIVs
controlled some $370 billion of assets as of September 14, and some have had trouble
refinancing their debt recently.
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