Search

The article reports on plans under discussion by Citigroup Inc. and other big banks to create a large fund giving financial backing to shaky mortgage securities and other investments hit by the global credit crisis. The talks are being brokered by the U.S. Treasury Department, specifically undersecretary for domestic finance Robert Steel.

The article reports on the difficulty experienced by hedge funds in reviving the mortgage-securities market in the U.S. It notes that such investors are getting involved in mortgage securities in which they purchase assets that others avoid in the hopes that prices will increase. It stresses that placing value on mortgage securities remains a challenge as house prices drop and mortgage defaults increase. It adds that banks continue to get rid of more securities leading to cheaper assets.

The article reports on the planned creation of a super-size investment fund in the U.S. Bankers and other financial institutions have expressed interest in committing more than $60 billion in credit lines to create a planned superfund that will be used to support the ailing mortgage-securities market. The three U.S. banks organizing the fund, Bank of America Corp., J.P. Morgan Chase & Co., and Citigroup Inc., would come close to their goal of raising a fund of $80 billion to $100 billion if the expressions of interest turn into firm commitments.