US banks plan bailout fund
(16 October 2007 – USA) Three major Wall Street banks have agreed to create a bailout fund to ease the sub-prime mortgage crisis.
The fund, to be worth more than US$75 billion (A$83 billion), has been planned by Citigroup, JPMorgan and Bank of America (BoA).
Named the Single-Master Liquidity Enhancement Conduit (SMLEC), the fund would buy securities in the market that are backed by mortgages at risk of default.
The result of this is that bank held securities would not need to be sold off en masse, which would further depress prices and borrowing ability, which would eventually flow on to consumers and have an impact on economic growth.
The planned fund comes after US treasury secretary, Henry Paulson, asked banks to devise a plan to prevent the worsening credit crisis.
While other banks have been encouraged to commit to the fund, no others parties have yet agreed.
HSBC, Britain’s biggest bank, said it has so far not participated in talks on this with their American counterparts.
Sandy Flockhart, HSBC's head of global commercial banking, said that it was not something that had been discussed and that there were no similar plans in Britain because it was primarily an American sub-prime issue.
Named the Single-Master Liquidity Enhancement Conduit (SMLEC), the fund would buy securities in the market that are backed by mortgages at risk of default.
The result of this is that bank held securities would not need to be sold off en masse, which would further depress prices and borrowing ability, which would eventually flow on to consumers and have an impact on economic growth.
The planned fund comes after US treasury secretary, Henry Paulson, asked banks to devise a plan to prevent the worsening credit crisis.
While other banks have been encouraged to commit to the fund, no others parties have yet agreed.
HSBC, Britain’s biggest bank, said it has so far not participated in talks on this with their American counterparts.
Sandy Flockhart, HSBC's head of global commercial banking, said that it was not something that had been discussed and that there were no similar plans in Britain because it was primarily an American sub-prime issue.
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