New York – In the latest step designed to stem the turmoil in financial markets, the U.S. Treasury said it will guarantee money market funds so that no other fund “breaks the buck.”
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The Treasury Department said it’s going to insure any publicly offered money market fund, both retail and institutional, that pays a fee.
President Bush has authorized up to $50 billion in protection, and Treasury said it’s acting using the authority of the Exchange Stabilization Fund.
“Concerns about the net asset value of money market funds falling below $1 have exacerbated global financial market turmoil and caused severe liquidity strains in world markets,” the Treasury said.
“In turn, these pressures have caused a spike in some short-term interest and funding rates, and significantly heightened volatility in exchange markets. Absent the provision of such financing, there is a substantial risk of further heightened global instability.”
It wasn’t immediately clear what fee mutual-fund firms would have to pay to participate.
Money market funds saw nearly $90 billion of net investor cash pulled out Wednesday, among the largest single-day drops in history.
That came on the heels of the Primary Fund, managed by New York money market fund investor The Reserve, breaking the buck.
Putnam Investments said Thursday that it was liquidating its Prime Money Market Fund due to “significant redemption pressure.”
The Treasury move comes on the heels of a program being designed to buy up bad assets from financial institutions and a Securities and Exchange Commission temporary ban on short sales
Slowly but surely our uncle is turning into our father; supporting all with a stipend, i.e. Kolel Gelt!
with all the bailout happening it looks like the rich and powerfull protect their own and also sweep the problem under the rug. since not one of the guy who caused this mess will get any punishment and most likely will get big bonuses to fix the very problem they caused.