WASHINGTON (Thomson Financial) - The new asset-backed 'superfund' set up by major US banks is 'expected to be temporary and serve as a bridge' that will allow time for structured investment vehicles (SIVs) 'to restructure in a more orderly fashion,' US Treasury Under Secretary for Domestic Finance Robert Steel said today.
He was speaking at the Institute of International Finance, a trade group of major international banks, in Washington.
Trading in asset backed commercial paper (ABCP) is 'typically a very liquid and important market,' Steel said, but it was recovering more slowly than other market segments from the subprime-created credit crunch.
The Treasury, banks and other investors feared the 'particular risk of a disorderly unwinding' of SIVs. As a result of the discussions, the three biggest US banks decided to establish the new 'superfund' designed to buy up and repackage subprime and other asset backed commercial paper so its holders would not be forced to liquidate their investments at fire-sale prices.
Steel said the technical organization of the fund is complex but the banks are making progress and 'participation is expected to broaden' in coming weeks.
Answering critics who call the fund a bailout for big banks and investors, he said the Treasury's and banks' 'effort is focused on improving market conditions so as to benefit all market participants, and not a particular subset of the market.' dennis.moore@thomson.com dem/wash/ro COPYRIGHT Copyright Thomson Financial News Limited 2007. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.