2007 October 14 Sunday
Big Bank Fund To Prevent Mortgage Securities Collapse

Geez, this suggests there's a problem in the securities market that could snowball.

Several of the world’s biggest banks are in talks to put up about $75 billion in a backup fund that could be used to buy risky mortgage securities and other assets, a move designed to ease pressure on a crucial part of the credit markets that threatens the broader economy.

Citigroup, Bank of America and JPMorgan Chase, along with several other financial institutions, have been meeting to come up with a plan to create a fund that could prevent a sharp sell-off in securities owned by bank-affiliated investment vehicles. The meetings, which began three weeks ago, have been orchestrated by senior officials at the Treasury Department, and the discussions have intensified in the last few days.

If only we had access to a bunch of parallel universes we could find out if funds like this one are needed in order to prevent market meltdowns and global depressions.

Should we react to this news by thinking that wise big money knows how to prevent calamity and big money is motivated enough to prevent a depression? Or should we react by thinking that our financial system isn't all that stable and economic panics are still quite possible?

Share |      By Randall Parker at 2007 October 14 01:51 PM  Economics Financial


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