Three of the largest US banks have announced a plan to ease the global credit squeeze with a massive fund for mortgage securities and short-term corporate loans which have been hurt by tighter credit conditions.
Bank of America, Citigroup, JPMorgan Chase and several other financial institutions have reached an agreement in principle to create a single 'master liquidity enhancement conduit' to buy up troubled debt.
The plan was facilitated by US Treasury officials in an effort to help unblock credit in the face of a squeeze that had prompted lenders to scale back many types of lending.
The amount of the new fund was not immediately disclosed, but the Wall Street Journal reported that the banks would pump in as much as $100 billion.
The fund is aimed at helping restore normal credit conditions for mortgage-linked assets, but also for short-term corporate loans many firms need to meet wages and other day-to-day expenses.
The three banks said that refinancing in the asset-backed commercial paper markets 'has been difficult despite the high quality collateral underlying many of these securities', and that the new fund would help facilitate refinancing of these loans.
The banks said other global banks and brokerages would participate in the plan but other company names were not disclosed.
