This morning CNN is reporting:
WASHINGTON -(Dow Jones)-
Bank of America Corp. (BAC), Citigroup Inc. (C), J.P. Morgan Chase & Co. (JPM) and several other financial institutions confirmed plans Monday to create a massive conduit to purchase highly rated assets from existing structured investment vehicles. The new conduit is supposed to "create and provide liquidity" for the asset- backed commercial paper market, which became extremely strained this summer as credit markets worsened.
Such joint collaborations, particularly at the urging of the federal government, are rare and reflect how strained credit markets have become. The conduit is being designed to help many of the assets that fell out of favor as turmoil in credit markets worsened.
So how good an idea is this?
Mary Beth Fisher, a rates strategist at UBS, said the yield on overnight asset-backed commercial paper is still high, at 5.25% Monday.
"It’s not clear that (the conduit) will be as effective as they want it to be, " she said. She said the best-case scenario is that the fund will help "the ABCP market come down about 25" basis points, but that isn’t a move that will happen quickly. "I definitely think this is needed," Fisher said about the fund. "I think it will help."
Not everyone agrees, however:
