U.S.Treasury says bank superfund will broaden

WASHINGTON (Reuters) - More participants will join a credit rescue plan that three lead banks are setting up to help stabilize the asset-backed commercial paper market, but it will be temporary, a senior U.S. Treasury official said on Saturday.

In prepared remarks for delivery to a panel session at the International Institute of Finance, Treasury's under secretary for domestic finance, Robert Steel, said Treasury had closely consulted U.S. and international regulators while it facilitated the banks' organization of the fund.

Its purpose is to help structured investment vehicles, or SIVs, avoid being forced into dumping mortgage assets that they hold at firesale prices by giving them a chance, for a fee, to offer them to a "superfund" set up by the banks.

"The structure they are developing is expected to be temporary and will serve as a bridge, which will provide time for participating SIVs to restructure in a more orderly fashion," Steel said.

Steel said setting up the fund, known as the Master Liquidity Enhancement Conduit, was complex and will take some time to complete.

The fund was announced last Monday by Citigroup (C.N: Quote, Profile, Research, Stock Buzz), Bank of America Corp. (BAC.N: Quote, Profile, Research, Stock Buzz) and JPMorgan Chase (JPM.N: Quote, Profile, Research, Stock Buzz). Wachovia later said it too will participate.

"Initial progress is being made by the lead banks and participation is expected to broaden in the weeks ahead," Steel said. The three original banks indicated that as much as $80 billion might be provided to start the fund.

Treasury Secretary Henry Paulson, a Wall Street veteran before he took over Treasury last year, said he thought the fund could be up and running by year-end and stressed that it was intended to make sure the best assets of the SIVs become

available to investors and not to bail out bad assets.