Banks to Form $100B Fund to Back Mortgage Securities
Critics say plan is unnecessary, only helps Citigroup
By Wesley Oliver,  Newser Staff
Posted Oct 13, 2007 6:37 PM CDT
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)
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(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.