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| Version 1 | Version 2 |
|---|---|
| Banks plan fund to revive market | Banks plan fund to revive market |
| (about 3 hours later) | |
| Some of the US's largest banks have announced plans to form a $75bn (£37bn) fund to support the ailing market for sub-prime debt. | |
| The unusual move, which includes Bank of America and JP Morgan, aims to boost confidence in and prevent a further sell-off of such investments. | |
| Such a sell-off would force banks, brokerages and hedge funds to write down the value of their assets. | Such a sell-off would force banks, brokerages and hedge funds to write down the value of their assets. |
| This could, in turn, further tighten credit markets and hurt the economy. | This could, in turn, further tighten credit markets and hurt the economy. |
| 'Unwise decisions' | 'Unwise decisions' |
| Analysts say the big US banks hope their move will deter the current holders of sub-prime mortgage securities from dumping them on the market at knockdown prices. | Analysts say the big US banks hope their move will deter the current holders of sub-prime mortgage securities from dumping them on the market at knockdown prices. |
| Such a firesale would further hurt banks' bottom lines. | Such a firesale would further hurt banks' bottom lines. |
| "Banks made unwise business decisions, and now they're scrambling to save themselves," said Steve Persky, chief executive at Dalton Invesments. | "Banks made unwise business decisions, and now they're scrambling to save themselves," said Steve Persky, chief executive at Dalton Invesments. |
| The FSA will support any British banks involved in the fund | The FSA will support any British banks involved in the fund |
| The bank said it had suffered losses of more than $3bn from writing down securities backed by underperforming mortgage and loans tied to corporate buyouts. | The bank said it had suffered losses of more than $3bn from writing down securities backed by underperforming mortgage and loans tied to corporate buyouts. |
| Citigroup is also part of the talks that have been led by the US Treasury and began three weeks ago. | |
| British banks | British banks |
| Reports said that British banks HSBC and Barclays were involved in the move, but HSBC said it had not participated in the talks and there were currently no plans for a similar fund in Europe. | Reports said that British banks HSBC and Barclays were involved in the move, but HSBC said it had not participated in the talks and there were currently no plans for a similar fund in Europe. |
| The Financial Services Authority, the UK finance watchdog, said that it would be supportive of any UK bank that participated in the fund. | The Financial Services Authority, the UK finance watchdog, said that it would be supportive of any UK bank that participated in the fund. |
| The discussions are similar to those conducted in 1998 to help organise the bailout of hedge fund Long Term Capital Management. | The discussions are similar to those conducted in 1998 to help organise the bailout of hedge fund Long Term Capital Management. |
| Higher US mortgage rates have sparked record home loan defaults among people who have poor credit histories. | Higher US mortgage rates have sparked record home loan defaults among people who have poor credit histories. |
| These defaults have hit financial markets worldwide because the sub-prime mortgages had been packaged up and sold to financial institutions around the world. | These defaults have hit financial markets worldwide because the sub-prime mortgages had been packaged up and sold to financial institutions around the world. |
| This has caused a wider credit squeeze as banks and other investors have been less willing to lend to each other because it is unclear where the bad debts lie in the system. | This has caused a wider credit squeeze as banks and other investors have been less willing to lend to each other because it is unclear where the bad debts lie in the system. |