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The top banks in the world are feeling the pinch of the global credit crisis touched off by the over extension of home loans in the United States. The liquidity crisis has caused the credit markets to essentially shut down as lending rates are exceeding the level borrowers expect, and banks are demanding a much higher level of credit worthiness to be approved for these loans.

To take some of the pressure off of the markets, Citigroup, Bank of America, and JPMorgan Chase have come together and planning a rescue fund to reinstate liquidity and confidence into a shaky credit market. The Federal Reserve was the first to pump money into the credit system earlier this year and now the private banks are looking to do the same.

If this succeeds, lending requirements should loosen up a little and liquidity in the market should provide a welcome relief to borrowers trying to get out of adjustable rate mortgages.

Citigroup Inc., Bank of America Corp., and JPMorgan Chase & Co., at the prodding of the Treasury Department, will buy distressed debt from markets roiled during the summer’s financial crisis. The joint effort is the result of more than a month of talks mediated by the government.
The plan is designed to inject more confidence into the market and increase investor appetite for the short-term debt known as commercial paper. The market for commercial paper, which is crucial for companies to fund short-term borrowing needs and which has historically been considered very safe, locked up this summer. via Yahoo! Finance.

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