The three banks putting together a $100 billion bailout fund to prop up the price of bonds backed by high-risk sub-prime mortgages have halved their fundraising target due to a lack of interest from banks and investors.

Citigroup, Bank of America and JP Morgan Chase are setting up a complex investment vehicle that would buy mortgage-backed securities and other assets from so-called structured investment vehicles (SIVs) - independently financed investment funds, many of which are managed by Wall Street banks.

These debt-financed vehicles have a large exposure to sub-prime mortgage bonds, which have plummeted in value in recent months. As a result, they are finding it virtually impossible to refinance their debts, meaning that some will need to engage in a fire-sale of their assets to keep in business. Such a move would further reduce the already declining valuations of mortgage bonds.

The bailout fund is seeking to prop up bond prices by averting such fire-sales. The fund was seeking about $100 billion of sub-prime mortgage bonds from the SIVs, which it planned to use as collateral to raise money in the credit markets. It would be used to pay the SIVs for their assets.

However, the bailout fund has dramatically scaled back its ambition since both the SIVs and the credit markets have balked.

Because bonds backed by sub-prime mortgages have been so tainted by the housing crisis, the interest potential lenders are demanding is so high it would severely reduce the amount the SIVs would receive for selling their assets to the fund. In some cases the banks that set up the SIVs are trying to solve the problem themselves.

In the UK, HSBC plans to close two SIVs and take $45 billion of their mortgage-backed securities and other assets on to its balance sheet.

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