Banks Create Money For a Fund to Bail Themselves Out

From The economist.com

"On Monday October 15th three of the largest banks launched the first big effort by the private sector to alleviate the [credit] crisis. Citigroup, JP Morgan Chase and Bank of America unveiled an agreement in principle for a fund, expected to be worth up to $100 billion, that would buy highly rated assets from troubled SIVs (structured investment vehicles). Other financial institutions are said to be considering joining. Although no government money will be available, America’s Treasury played an important role in the talks that led to the fund’s creation. The authorities worry that “disorderly” markets could drag down the economy."

This is still of course a temporary solution. The banks can create a false demand and trade each others junk for as long as they want. Eventually though, they will have to open up their books and show just what the assets are truly made of (or aren't made of), that will be the true day of reckoning. However when banks, who control and create the money supply, can form a $100 Billion fund to create a false market that day may be far in the distance.

The last part of the article is the best (emphasis added):

"Even those who support the fund admit that it is, at best, a temporary solution. As one banker puts it, it is about buying time so that the real problems facing the debt markets can be sorted out. In the case of asset-backed commercial paper, the two biggest are the inherently unstable structure of SIVs and their lack of transparency. Not only do they sit off their creators’ balance sheets but they do not even have to publish their holdings. Only when these underlying issues are addressed is confidence likely to return."

Lets see, when should we let everyone know that billions of dollars of assets are worth nothing, yet they have been the invisible profits that made up the last 5 years of earnings?