You don't have to be an information addict these days to get a sense of the grim realities that the subprime-mortgage crisis and resulting credit crunch have brought upon the banking industry.
Last week, Bank of America announced it was closing its $12 billion Columbia Strategic Cash Portfolio, one of the largest U.S. enhanced cash funds, after it was overwhelmed with withdrawal requests from panicked investors. (Enhanced cash funds are similar to money-market mutual funds, but cater to institutional investors and tend to invest in riskier securities.) Days later, Citigroup announced it would bring $49 billion of assets from seven structured investment vehicles (known as SIVs) onto its balance sheet in an effort to make sure the SIVs stay afloat. (SIVs are like virtual banks that issue short-term commercial paper, typically bought by mutual funds. They use that money to invest in longer-term securities, including subprime mortgages.) Other banks, including HSBC and U.S. Bancorp, had already announced similar moves. Then, there's Countrywide Financial, which has been releasing a steady stream of bad subprime news for months now.
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