US banks scrap plans for SIV 'superfund'
( FT ) - The US Treasury-backed $75bn "superfund" planned by the top three US banks was scrapped on Friday after lack of interest from other banks in providing financial support.
The banks also faced waning interest from cash-strapped structured investment vehicles ( SIVs ) in selling assets to the fund, according to someone close to the plan.
The fund, which was to be managed by BlackRock , was proposed by the banks with the encouragement of the Treasury two months ago amid fears of possible fire sales by SIVs .
Such sales could cause further dislocation in the credit markets and threaten money market funds, which are the main investors in SIV commercial paper.
The plan was met with widespread scepticism and the need for the fund has receded as many SIV managers have taken other steps to shore up their finances.
Last week, Citigroup, which is one of the banks backing the fund along with Bank of America and JPMorgan Chase, said it would take SIVs with $49bn of assets on to its balance sheet.
Nevertheless, this week the banks restated their commitment to go ahead with the plan. The banks and the Treasury are expected to say that the plan for a "buyer of last resort" for SIV assets was worth pursuing and was only ever conceived as one of a number of possible options.
SIVs , which sell cheap, short-term debt to invest in higher-yield, longer-term assets, have been at the centre of the liquidity squeeze as investors ditch exposure to anything that could be tainted by subprime mortgages.
The scrapping of the superfund plan came as two more US banks bailed out money market funds they manage.