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Money Market Fund Guarantee Expires
Because as we all know, no more Money Market funds have their assets tied in with major Bank Holding Companies whose pristine credit rating is the one and only criteria for permissive investment in balance sheets loaded up with toxic loans yet backstopped by the very same taxpayers who will lose everything if they demand transparency. The Treasury and the Fed have now uncovered a neat way for unwitting US citizens to hold the gun of Mutual Assured Destruction against their own heads if they demand transparency and thus yet another round of "catastrophic failure." In other words, no bucks will be broken unless HR1207 passes. Demand Fed accountability at your own peril.
From the Treasury Department:
Treasury Announces Expiration of
Guarantee Program for Money Market Funds
Program Winds Down as anticipated, Generates $1.2 billion in participation fees for U.S. Taxpayers
The U.S. Department of the Treasury today announced that the
Guarantee Program for Money Market Funds (the "Program") will expire
today. The Program was initially established for a three-month period that could be extended up through September 18, 2009. Since inception, Treasury has had no losses under the Program and earned approximately $1.2 billion in participation fees.
"As the risk of catastrophic failure of the financial
system has receded, the need for some of the emergency programs put in
place during the most acute phase of the crisis has receded as well,"
said Treasury Secretary Tim Geithner. "The Guarantee Program for Money
Market Funds served its purpose of adding stability to the money market
mutual fund industry during market disruptions last fall and ultimately
delivered a healthy return to taxpayers."
Treasury designed the Program to stabilize markets after a large
money market fund's announcement that its net asset value had fallen
below $1 per share ("broke the buck") in the wake of the failure of
Lehman Brothers in September of 2008. Maintaining
confidence in the money market mutual fund industry was critical to
protecting the integrity and stability of the global financial system.
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That lead in brought to mind the first and last scene in Fight Club
A little flashback humor.
funny how they just passed the potato ain't it?
sneaky boy that tiny tim.
of course, he's an honorable man.
maybe Bruce could write a note to Treasury asking for them to define "healthy return".
if he does, please pass along that someone wants to make an offer on his house. the Bank of Zimbabwe just approved us for a mortgage. they're trying to get into the US RE market.
Look at the 1 and 3 month t-bills they have been dropping because of the end of the guarantee. They can end the guarantee and bulk up the demand for short interest t-bills. What a wonderful racket.
Glass-Steagall, it was SOOOOOO outdated...
/wrist
Aren't a large portion of these money markets corporate accounts? That money isn't going to end up in equities. Where would be the "safest" place for it to go, if a company was afraid of breaking the buck again? Short term treasuries?
Will the possible redemptions cause havok anywhere in the market?
It will be interesting to see if the MSM picks up on this over the weekend or next week.
Man, if I was in charge of a bank or credit union (not the bac, ms, gs, wfc, c etc group), i would be running full page ads about this. what a great way to bring in new customers. "did you know that your funds are no longer insured? may want to think about that and bring your bucks to our fdic insured bank or national credit union insured credit union"
Agreed, although yields are garbage for insured cash equivalents. Sans any major trigger event, I'm not sure if joe six pack is concerned about protection anymore.
agreed on the major trigger event. if the msm does discuss it, it won't be viewed as a trigger event. if there is a trigger event, then the msm will do a great job of scaring the shit out of joe6pack.
Note the MM guarantees are the first to go while the big bank guarantees continue forever? Who loves you baybee?
Next the FDIC will be pulled back to force the sheeple to park the money somewhere else besides their bank.
Can we not call this a "fee", and call it what it is, a "tax"? It's not like the banks paid for it, we did.
Anyone stupid enough to have their money in a non-guaranteed Money Market fund (that yields on average 0.06%) deserves to be wiped out.
i tend to agree. there are still people and groups out there that have not gotten their money back from Reserve and while they will get most of it (i've read 98-99%), they won't get all of it. I would at least want to have all of my money, even though i'm only getting a few bps on it.
+10000
waiting for your column gg. i also hope you will offer advice on how/where to buy good gold coins...eagles? maple leafs? I would like to put some of my stuff in those to pass along to my boys.....
For purchasing gold/silver bullion I use
APMEX.com and gainesvillecoins.com
Been buying through them both for well over a year and never had a problem.
thank you bam. i will check it out.
I predict S&P 1,110 by 11/18 then retest.
Wow. In the old days (pre September "08 investors might expect to receive some for of disclosure disclosure that the securities they owned are no longer guaranteed by a third party. This mm guarantee termination hardly hit the presses.
Anybody who still has money in a money market fund is an idiot.
I am most definitely an idiot. My 401k has no freakin options, the MM being the "safest." What should I do? Pick the bond fund? Pay the ridiculous hit in taxes and pull it out? At least I got a big lump of gold buried in my backyard!
Not to be taken as a recommendation, but at least ask your HR person about Self-Directed (aka IDA) option. Most have it, many don't advertise the choice.
If that's the only option, take the hit and plough all cash into PHYSICAL Gold. I GUARANTEE that in the very near future that Gold will much more than make up for the hit. Make sure you buy cash so the IRS cannot get it's greedy little paws on any "appreciation" (which will be A LOT - trust me) you get.
He can't give you an answer because there isn't one. If you have a 401k your money is stuck and if a money market is the surest bet then by all means take it.
"nybody who still has money in a money market fund is an idiot."
Or gold for that matter.
anon
It got me 300% in 10 years. What did money market funds get you these past 10 years Mr. Denninger?
You are paid essentially nothing for some unknown risk. All the treasury MM funds are closed.
The dichotomy between .01 Ts and the mania in equities is quite disturbing.
Money market funds have to be well on their way to extinction. The non-gov-t taxable funds have got to be holding a substantial portion of their assets in t-bills to ensure they have liquidity to meet redemptions with the federal guarantees expiring. Fund management companies are reducing fees to keep yields above zero.
I would think the erosion of assets in money market funds will cripple the market for commercial paper. It will also push more cash into banks, increasing the exposure to the FDIC which is close to tapped out already.
Didn't Deutsche (or another IB) propose a new offering a floating-NAV money fund recently? Seems like the wheel needs some re-inventing...corporate treasury departments have to be scrambling for alternatives, id assume
Same question here. What can i do if I own a 401K and do not want to move to the MuFus, indexes and stocks?
Some Help:
My money is in a US Gov. Money Market Fund at TD Ameritrade. I know the investments are agencies but since the Gov. took them over I was wondering if that even is a "safe bet". It is getting nothing but I dont care about that. I figure if they default on the agencies (Freddie and Fannie) then that would send a signal to everyone about the safety of Trsy's.
Any thoughts? Thanks!
All depends on the investment goals you set..is it taxable / current use funds or tax-deferred /IRA account?
Taxable or short-term...perhaps try a local credit union. CU payouts are typically a little better, and the fees don't kill you. Or, maybe ameritrade has some CD options. Though when I priced Schwab CD offerings today...yeesh. nothing exciting
Tax-deferred...get 2nd and 3rd opinions. IF safety / income is your goal, a high-quality, low-risk fund (utilities, maybe?) better options.
And i'd be cuatious about advice here too...good luck
Uncle Sappy collected like $6B in fees and paid out zip--not a bad deal for Sappy.
Thank you McGriffen.
Yes safety is my only concern here not yield.Just trying to be the first to panic....if ya know what I mean. ;)
Its a bunch of bullshit anyway. If things fell apart, do you really think that would have made a difference anyway?
I guess it's time for GS to take some profits on their investments.