Paulson welcomes banks' steps on subprime debt

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ORLANDO, Florida (Reuters) - U.S. Treasury Secretary Henry Paulson said on Monday that moves by some banks, including Citigroup to bring off-balance sheet investments tied to subprime mortgages back onto their books would help ward off a widespread credit crunch.

ORLANDO, Florida (Reuters) - U.S. Treasury Secretary Henry Paulson said on Monday that moves by some banks, including Citigroup to bring off-balance sheet investments tied to subprime mortgages back onto their books would help ward off a widespread credit crunch.

"There is no doubt that greater disclosure, which has been driven by investors, is a positive," Paulson told reporters before addressing a community group.

"I think for a great number of financial institutions, standing behind their SIVs and taking them on their balance sheets is a very positive step and it will help move a process along," he said, referring to so-called structured investment vehicles.

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Citigroup's action, announced last week, means it will assume the debts that any of the SIVs it sponsored incur from losses on U.S. subprime mortgages, extended to borrowers with spotty credit.

Paulson made clear he continued to believe a "super SIV," also called the Master Liquidity Enhancement Conduit, was still needed but he would not say whether he felt the fund would be in place by the end of this year, as he had said earlier.

"I'm optimistic we're making progress here," Paulson said.

The U.S. Treasury helped broker talks among a number of top U.S. banks that led to the decision to set up a facility to buy assets from struggling investment vehicles and resell them.

(Editing by James Dalgleish)