Banks ‘agree market backup fund’

Source: Stock Market Digital

Date :11/11/2007 12:33:34 PM

The top three US banks have reportedly agreed on the structure of a backup fund of at least $75 billion to stabilize credit markets.

The New York Times today reported that Bank of America, Citigroup Inc. and JPMorgan Chase & Co. officials reached agreement late on Friday, approving a simplified structure after two months of negotiations.

Previous versions of the backup fund had been widely considered infeasible, prompting concerns about the feasibility of a final plan, the Times reported.

Avoiding disruption

The newspaper said the proposed fund could begin operating by the end of the year and the banks could start asking some 60 financial institutions to contribute to the fund in the course of the next five to ten days.

The fund is intended to avoid a severe credit market disruption by either providing time for asset prices to recover or by discouraging structured investment vehicles from unloading their holdings en masse, the New York Times reported.

The fund would require the major credit rating agencies' blessings

Treasury Department officials declined to comment.

November 11 2007