Bank of America, Citigroup and JPMorgan have agreed to create a fund of $80 billion in an attempt to revive the asset-backed commercial paper market, according to Bloomberg.
The fund will buy assets from structured investment vehicles (SIVs) and could be formally announced today. The SIVs would not need to sell their holdings at massively cut-down prices according to the sources.
Talks were initiated between the banks and the Treasury department following a shutdown of the commercial paper market and the sale of about $75 billion of assets.
The banks and the Treasury were taking nothing for granted and showing a desire to take the problem on, says Tony Crescenzi, a chief bond market strategist at Miller Tabak & Co.
SIVs use short-term funding to buy long-term assets and the credit crisis which has heavily affected the commercial paper markets has caused concerns that SIVs may sell their short-term assets at a loss.