I still find it ironic that everyone waited until the housing market took a dump to do anything about the whole situation.

Major banks including Citigroup Inc are looking at setting up a roughly $80 billion fund to buy ailing mortgage securities and other assets, in a bid to prevent the credit crunch from further hurting the global economy, sources familiar with the matter said.

Representatives from the U.S. Treasury have organized conversations among top global banks, sources said, as financial institutions grow increasingly concerned that a certain type of investment fund linked to banks may have to dump billions of dollars of repackaged loans onto financial markets.

A fire-sale of assets could lift borrowing costs globally, trigger big losses from investors and force banks to further write down some holdings on their balance sheets. Such sales could trigger huge losses for banks, and in the worst-case scenario tip the U.S. or Europe into recession.

Someone should have done something about the lending practices that got them into this mess in the first place. Then again, they got to show a ton of new loans and lots of numbers on their balance sheets so it all made sense in the beginning. Well, it made sense if you’re a bowling ball.

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