By Dan Wilchins

NEW YORK (Reuters) - The three top U.S. banks said they have abandoned a government-supported plan for a fund to bail out structured investment vehicles after Citigroup (C.N: Quote, Profile, Research) and others launched independent rescues, making the fund unnecessary.

The retreat from the potentially $80 billion (40.3 billion pounds) Super-SIV by Citi, Bank of America (BAC.N: Quote, Profile, Research) and JPMorgan Chase (JPM.N: Quote, Profile, Research) was not surprising to many analysts, who said the fund was a flawed idea and would have been difficult to execute.

But the lack of demand for a super-SIV fund was seen as a positive in jittery money markets, where rates have been high enough to trigger central banks globally to conduct auctions to thaw the market.

"It's akin to not having to use your insurance policy -- the reasons for the fund to be there have gone away, which is good news for the money markets," said Peter Crane, who tracks the money market mutual fund industry at Crane Data in Westboro, Massachusetts.

The banks said in a statement late Friday afternoon that they had determined how the Super-SIV, known as Master Liquidity Enhancement Conduit (M-LEC), would work and that the fund was ready to be launched if market participants had demanded it.

But, the banks added that feedback from possible financiers and users of the fund indicated it was no longer necessary because SIVs were selling assets on their own, finding other ways to raise money or otherwise restructuring.

The rescue fund was announced in mid-October as many SIVs were struggling to refinance short- and medium-term debt to fund longer-term assets including mortgage assets.

Many banks and investors had feared SIVs would dump bonds into financial markets, creating a fixed-income glut that could have driven up borrowing costs.