Bankers wary of investment fund rescue effort

By Thomas Atkins and John Poirier

WASHINGTON (Reuters) - Bankers remain wary of plans to launch a massive investment rescue fund to soften the blow of the U.S. subprime meltdown, saying it could interfere with a market recovery and stall a resolution to the credit crisis.

Carl Stalberg, executive chairman of Swedbank (SWEDa.ST: Quote, Profile, Research, Stock Buzz), said on Saturday he doubted the fund would be an effective way for banks to liquidate billions of dollars in structured debt in markets where buyers have effectively gone on strike.

"It might be better to let the markets work it out. Trading platforms like that are always a difficult task," Stalberg told Reuters on the sidelines of a banking conference.

Stalberg spoke one day after a meeting of finance officials from the Group of Seven rich nations where U.S. Treasury Secretary Henry Paulson lobbied in support of the plan, which aims to restore confidence in the financial sector.

Bank of America Corp (BAC.N: Quote, Profile, Research, Stock Buzz), Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz) and JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz) announced on Monday plans to create the multibillion dollar fund, which was hatched with the U.S. Treasury's blessing.

The fund is intended to prevent bank-affiliated Structured Investment Vehicles, or SIVs, from dumping billions of dollars of bonds linked to subprime mortgages and other debt back into financial markets.

But despite the U.S. government's active role in seeking support for the plan, many bankers and investors remain cautious -- with some saying they have nothing to gain by participating.

"Markets are rather suspicious about that policy. It could interfere with the market mechanism and introduce biases," said Olivier Garnier, deputy general manager at Societe Generale Asset Management.