No run on money market mutual funds
In the latest of a long list of stunning events, the U.S. Treasury (or really the American taxpayer) is now guaranteeing that money market mutual funds won’t break a buck”. The Treasury said: “For the next year, the U.S. Treasury will insure the holdings of any publicly offered eligible money market mutual fund — both retail and institutional — that pays a fee to participate in the program.”.
Call it the FMMMFIC for Federal Money Market Mutual Fund Insurance Corporation. The limit is set at $50 billion, although that’s probably a fake number. If a run really did emerge on money market mutual funds the Treasury would front even more money.
It’s a good short-term measure to prevent a run on the Wall Street bank. But what happens later on? The genie is out of the bottle. Is the taxpayer going to guarantee $3.5 trillion in mutual fund assets from here on? (As of the latest figures, $1.2 trillion of that is individual investors; the rest is institutional.) In essence, federal insurance has now been extended to one of Wall Street’s major products.
“Money market funds play an important role as a savings and investment vehicle for many Americans,” the Treasury said in statement.
Concerns about the value of money market funds falling below $1 have exacerbated global financial market turmoil and caused severe liquidity strains.
We’re here to help you navigate this changed world and economy.
Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.
In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.
Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.
You make our
Support nonprofit news you love with a gift today.