EXPENDITURE STRATEGY - LARGE US BANKS

1. Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co., the three largest U.S. banks, reached an agreement on the structure of an $80 billion fund, known as the master liquidity enhancement conduit, or M-LEC, to help revive the market for short-term debt
2. The fund would buy some of the $320 billion in assets held by so-called structured-investment vehicles, known as SIVs.
3. The banks are pushing to have the fund in place by yearend because SIVs are unable to get short-term credit to finance their higher-yielding investments as losses on subprime mortgages drive investors from all but the safest government debt.
4. Citigroup took action on Nov. 5 to shore up its SIVs. The New York-based bank provided $7.6 billion of emergency financing to the seven SIVs it runs after they were unable to repay maturing debt.


[Structured-Investment Vehicles:
1. SIVs, pioneered by Citigroup in the 1980s, borrow in the short-term commercial paper market to invest in longer-dated securities ranging from mortgage bonds to bank debt.
2. SIV assets have dwindled by at least $75 billion since July as the companies struggled to raise short-term debt.]

[Click here for full story at: BLOOMBERG.COM]