This is the best they could come up with? In the wake of Lehman Brothers'
A purely symbolic gesture?
This industry initiative complements the Federal Reserve's decision to expand its funding facilities (the Fed has broadened the types of collateral it will accept to include equities!). However, it looks to me like a hastily crafted, symbolic action as a show of bankers' will to restore order to the industry.
First, despite what Nouriel Roubini thinks, I don't think that Goldman and Morgan Stanley will suffer the same loss of confidence that toppled Bear and Lehman and pushed Merrill into the arms of Bank of America
Are commercial banks really on the side of investment banks?
Do JPMorgan Chase
Perhaps the fund was an effort to pacify Treasury Secretary Paulson, who is anxious to see the industry band together to solve its own problems. Do you remember the $75 billion "Super-SIV" that JPMorgan, Bank of America, and Citigroup spearheaded back in the early days of the credit crisis? Paulson was a strong proponent of the project, which was meant to provide liquidity for SIVs (structured investment vehicles). That's what this new $70 billion fund reminds me of.
What happened to the Super SIV? Citigroup decided to focus on fixing its own house, by bringing $50 billion of SIV assets onto its balance sheet, so the Super-SIV never got off the ground. When the case for collective action isn't overwhelmingly compelling, firms will generally act independently in their own self-interest.
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Alex Dumortier, CFA has no beneficial interest in any of the companies mentioned in this article. JPMorgan Chase and Bank of America are Motley Fool Income Investor recommendations. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.