Capital of big U.S. banks has decreased by $40 bn. since the start of liquidity crisis, which can undermine economy growth - FT

/INTERFAX-AFI, New York, October 17, 07/ - Capital of big U.S. banks has decreased by $40 bn. since the start of liquidity crisis, which reduces opportunities of lending and can threaten economy growth, Financial Times writes. "Such a considerable reduction over such a short period of times has never been observed, and this is rather serious situation as capital reduction can lead to deterioration in credit field", - economist of Merrill Lynch David Rosenberg noted. When ignoring this problem, it can significantly slow down the economy growth, he considers. The European banks face the similar problems many watchers express their concerns about the capabilities of small banks to deal with difficulties related to their balance sheet conditions. The anxieties about the impact of credit crisis on balance sheets of American banks were one of the reasons why the U.S. ministry of Finance called for creation of a "superfund" that has to purchase the assets of funds that have troubles. Three biggest American banks - Citigroup, JPMorgan Chase and Bank of America - informed this week of creating a fund that would buy the funds' securities that are backed up by mortgages to the sum of $100 bn. Citigroup that manages the assets of funds with $80 has purchased some amount of commercial paper of these funds. On Monday, the bank declared of interrupting the shares purchase because of deterioration of capital indicators due to buying a big number of commercial paper and loans, bonds for which could not be sold. According to Moody's evaluation, the assets of special funds, created by banks, decreased from $395 bn. to $320 bn. in June. "Big banks had to accept commercial papers on to their balance sheets, and, as a result, they suffocate because of assets that they had not planned to buy", - Mr Rosenberg says. - It is possible that it would lead to reduction in the volumes of household loan. [2007-10-17]