Citigroup, Bank of America and JPMorgan have agreed to set up a fund of about $80 billion to help revive the asset-backed commercial paper market, sources claimed.
The fund will buy assets from structured investment vehicles (SIVs), units set up to finance purchases of securities such as corporate bonds and subprime mortgage debt.
Other banks may join the fund, which would help SIVs avoid selling their $320 billion in holdings at fire-sale prices, upsetting credit markets, the sources said.
The Treasury Department began the talks between the banks after a shutdown of the commercial paper market left SIVs and other sellers unable to borrow, forcing sales of about $75 billion of assets.
The Treasury jump-started talks between the banks with a meeting of Wall Street executives in Washington on September 16th, it was reported.