US banks reject SIV rescue fund

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看来大家都不买财政部的帐。后面还有好戏！

SOME of America's biggest banks have pulled the plug on a plan backed by the Treasury Department to rescue troubled structured investment vehicles that were levelled by the subprime mortgage crisis.

The decision came on Friday after it became clear that neither the banks nor the structured investment vehicles were willing to create a fund to bail out the SIVs.

The reversal is a setback for the Treasury Secretary, Henry Paulson, who had urged banks to set up the so-called super SIV to keep the crisis in housing-related debt from worsening. A proposal by the Bush Administration to modify home loans for troubled borrowers also met with scepticism.

"It is somewhat politically embarrassing for the Administration," said Bert Ely, a banking industry consultant.

"The mortgage modification program is much more significant and will get much more media attention if it doesn't get the results that have been promised. That discussion will put the SIV plan into ancient history."

At the Treasury's behest, Bank of America, JPMorgan Chase and Citigroup worked out the SIV plan in hopes of avoiding a sharp sell-off in securities owned by these vehicles. Such a fire sale might rock already jittery credit markets.

It was thought that the fund, called a master liquidity enhancement conduit, or M-LEC, might raise as much as $US80 billion ($92.3 billion) to buy assets from the SIVs. But many of the 30 or so troubled SIVs have moved to solve their problems, sharply reducing their holdings of asset-backed securities.

Many banks were reluctant to commit funding to the super SIV.

On Tuesday, leading banks and BlackRock, which was to manage the super SIV, said they were committed to the rescue fund. Over the next few days, however, bank representatives and senior Treasury officials began to discuss whether to abandon the plan.

The banks left open the possibility that the super SIV could re-emerge, if necessary.

"The consortium will continue to monitor market conditions and remain committed to work collaboratively on any appropriate solutions, including activation of the M-LEC, if needed," the group said.

The New York Times