(C), Bank of America Corp. (BAC), JP Morgan Chase - Co. (JPM) and several other financial institutions said they would join together to create a fund totaling between $75 billion and $100 billion, known as the Master Liquidity Enhancement Conduit, to purchase assets of SIVs and prevent the possibility they might be forced to dump them on markets at fire-sale prices to raise money. SIVs are funds that borrow to invest mostly in asset-backed paper and corporate bonds. They make profits from the difference between short-term borrowing rates and long-term returns. A credit crisis in August and September, sparked by losses in the subprime mortgage market, pushed up short-term interest rates, squeezing these funds. Steel said U.S. Treasury officials believe the fund will help speed up the recovery of the market for asset-backed paper, which should benefit all segments of the credit market.
Source link: http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=6be6a6a9-3125-4dd8-8683-4d46482eabf9
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