|
|
|
|
|
|
| |
| |
By Category |
 |
|
|
| |
|
| |
| |
India On Media |
|
|
|
| |
|
| |
|
|
| Money
News |
|
| Banks plan fund to revive market |
| Some of the US's largest banks have announced plans to form a $75bn (£37bn) fund to support the ailing market for sub-prime debt
|
| UNITED STATES OF AMERICA
, 15-October-2007
10:17:49 AM |
| The unusual move, which includes Bank of America and JP Morgan, aims to boost confidence in and prevent a further sell-off of such investments.
Such a sell-off would force banks, brokerages and hedge funds to write down the value of their assets.
This could, in turn, further tighten credit markets and hurt the economy.
'Unwise decisions'
Analysts say the big US banks hope their move will deter the current holders of sub-prime mortgage securities from dumping them on the market at knockdown prices.
Such a firesale would further hurt banks' bottom lines.
"Banks made unwise business decisions, and now they're scrambling to save themselves," said Steve Persky, chief executive at Dalton Invesments.
The bank said it had suffered losses of more than $3bn from writing down securities backed by underperforming mortgage and loans tied to corporate buyouts.
Citigroup is also part of the talks that have been led by the US Treasury and began three weeks ago.
British banks
Reports said that British banks HSBC and Barclays were involved in the move, but HSBC said it had not participated in the talks and there were currently no plans for a similar fund in Europe.
The Financial Services Authority, the UK finance watchdog, said that it would be supportive of any UK bank that participated in the fund.
The discussions are similar to those conducted in 1998 to help organise the bailout of hedge fund Long Term Capital Management.
Higher US mortgage rates have sparked record home loan defaults among people who have poor credit histories.
These defaults have hit financial markets worldwide because the sub-prime mortgages had been packaged up and sold to financial institutions around the world.
This has caused a wider credit squeeze as banks and other investors have been less willing to lend to each other because it is unclear where the bad debts lie in the system.
|
|
|
|
|
|
|
|
ADVERTISEMENTS
Free offer!!! Become an administrator for your zip home page, "Post" local news (local to your postcode)& pictures, "Post" advertisement banners from local companies. Make Extra money.
|
 |
 |
|
|
| |
|
