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Banks to Form $100B Fund to Back Mortgage Securities

Posted Oct 13, 07 6:37 PM CDT in Business 

(Newser) – Citigroup and other major banks are banding together to create a $100-billion fund to buy back shaky mortgage securities in order to contain the threat of their undermining the markets and hurting the economy. The unprecedented project, pooling money from banks like JP Morgan and Bank of America, has been hatched in cooperation with the Treasury Department, the Wall Street Journal reports.

The banks hope the new fund, or “superconduit,” will ease investor concerns about the hefty size of the bank-affiliated funds tied to the volatile subprime mortgage market. Other large banks are criticizing the project, saying it’s unnecessary and only benefits Citigroup, whose funds tied to mortgage securities are the world’s largest.

Source Wall Street Journal

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A pair of patrons enter a Citibank branch in Boston, Monday, April 16, 2007. First-quarter profit at Citigroup Inc. dropped 11 percent, but still came in better then expected, as the nation's largest...   (Associated Press)
The Citibank logo is shown on a branch office in this April 11, 2007 file photo in New York. Citigroup Inc. estimated Monday, Oct. 1, 2007 that its third-quarter profit will drop 60 percent, as the nation's...   (Associated Press)
A home is posted for sale Tuesday, Sept. 25, 2007 in Tacoma, Wash. An index that forecasts near-term home sales fell in August to a record low as would-be homebuyers had difficulty getting mortgages....   (Associated Press)
FILE PHOTO: Citigroup Predicts 60 Percent Drop In Third Quarter Profit   (Getty Images)
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subprime mortgages  • Citigroup  • JPMorgan Chase  • Bank of America  • mortgage backed securities  • structured investment vehicles



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