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Money Market Guarantee Program Ending In One Week
The Treasury's Money Market Fund guarantee program, which was among the first to be instituted in the wake of Lehman's collapse, after the Reserve Primary Fund broke the buck (for a great description of what really happened, go here) is set to expire on September 19, after an extension had been granted on March 31 to postpone the initial April 30 expiration.
As a reminder, and as all money on the sidelines proponents will remind anxious bears, there is about $3.5 trillion in cash that is currently insured by the US Treasury. And speaking of the whole sideline money theory, which has been disproven over and over by those who don't actually have an agenda to push this stock or that on CNBC, here is another perspective on the issue courtesy of today's Rosenberg notes:
The reality is that the mountain of money is no higher or lower than it was when the market was plumbing the depths through 2008 — money market mutual funds back then were $3.5 trillion and guess what? Today they are $3.5 trillion. Go figure.
As for the guarantee expiration, perhaps this is another effort by the administration to have citizens push their money out of money markets and into the speculative stock market casino, now that this implicit guarantee is removed and ultimately any money would be lost either way. Alternatively, it could simply be an indication of the Treasury's false sense of security that another major run on the bank at this point is not a threat. Alas, the latter does not jive too well with Mr. Geithner's disclosure that despite the economy having returned to a properly functioning status, virtually all other government crutches will likely be here to stay for years.
h/t Rich
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jive turkey
If they won't go into the coral to slaughter. Slaughter them in the field.
What are you slaughtering - sea urchins?
lmao... sea urchins it is :-)
What are you slaughtering - sea urchins?
I'm not slaughtering anything. Wall street is trying to slaughter peoples savings. Because well you make more money conning savers than you do broke people.
Coral/corral ?
It does however seem that that's what they are trying to do.
Oh my bad. I always get my little dyslexias. It took me years to stop spelling thier instead of their.
Their/thier is my issue still... no shit.
Don't forget abour your kalimari and calamari issues as well...
I got a hairball with your name on it lady...
Cough it up then and don't make a mess on the rug :-)
Your and you're... site, cite and sight...whose and who's... threw and through...
I have boned on each of these recently. The person who invents dyslexia checker shall make a fortune.
... the apostrophie 's or s' thing is a bugger as well...
And you have furballs... not hairballs... another ding for you cat... get with the program will ya :-)
http://en.wikipedia.org/wiki/Hairball
I'm a furball with hairballs lady...
That's Wikipedia for god's sake... only cats with furballs rely on Wikipedia to educate the masses about their plight. I was on Wikipedia this morning and edited that entire page just to trip you up today... you fell right into my trap... you poor, poor cat :-)
And by the way... this entire mini-thread is just hysterical starting with slaughtering sea urchins in the coral... lmaorotfwtime... oh, just two more things cat... Minnie is fine... and I will need a 9 cap when you convince your boss that my business would be a nice acquisition and addition to your holdings...
We sell 7's... buy/create 20's... but if your hot enough the chief might buy you out at a 15 cap.
Is this one (more) reason the treasury yields have been dropping - people who see more risk in the no longer guaranteed Money funds moving to treasuries?
in my opinion, yes.
i'd be a little surprised, though there is probably some of that. money mkts equivalent treasuries would be shortest terms, and those have been unremarkably different as far as their yield for a while now (ie close to zero). i doubt you have people massively pushing for duration and going from money mkt to 10 years...
Nope. As pivot says, if money market money was fleeing to treasuries, you'd see negative 90 day t-bill rates.
If you want safe cash, high grade muni's and treasuries look better than FDIC guaranteed bonds. If things get bad enough where you really need a federal guarantee, you'll be haircut. FDR haircut depositors in banks. Obama will do the same.
We have seen Obama's brand of corporate socialism for what it is. Everything is too big to fail except for the American middle class who is too little too matter. Of course backstopping people's money market savings is the only program to go. It doesn't help the Fat Cat Ponzi Scheme.
What kind of clueless idiot voted this guy into office?
Put the tax cheat in charge of the treasury and good things will happen.
You do realize this goes way back before January, don't you?
The problem with folks who make this into an Obama/Bush or Democratic/Republican problem is that it may make them feel better about how they voted, but they miss the forest for the trees.
Vent all you want, but wake up to the fact that both parties are just playing us all for chumps. It's the revolving door between business and Government, and the pipelines of cash between the two, that have ended up capturing our democracy.
+100
I'm so sick of of people trying to politicize everything. They just don't get it. Politics is just one more tool the elite use to divide the masses. White/Black Red/Blue Communist/Capitalist, it's all in your mind, look up the Rothchilds and see how long this is going on. Anyone who thinks Obama invented this game, or is even running it, is borderline retarded and should look into getting some gov't subsidised mental health care.
Exactly - remember the old axiom: Divide and Conquer.
Steal From You... the theme of your message is actually very valid... and I agree with you... however your intense fixation on Obama and the democrats permeates everything. This started way before Obama, before Bush 2, before Clinton, and before Bush 1. Bush 2 started giving away the farm with Paulson... and Obama followed down that same path. I have no real allegiance to either party... I voted for Obama but I am not in agreement with what he is doing right now... but in my opinion you should step back a little and see that this has been developing for a very long time. Take it for what it is worth... or not...
You forgot to mention the socialism started under Paulson and his leader chimp jesus. The party of chimp jesus invented crony capitalism that screws the average investor. Don't forget that turd Cox was a republican Ca. congressman... Otherwise I agree with you.
Me, I knew Mr. Change was Mr. Bullshit when he said he did not take lobbyist money... $10 million alone in private donations from Wall St. lawyers by Aug. 2008. If those shiesters are not lobbyists, I don't know what is...
So I can't vote for Keatings' wrinkled ass toady with the wako religious cult broad at his side... can't vote for Mr. Change and his sidekick Mr. Easy Credit Card legislation...
I took the third road less traveled vote wise...
No more backstop? Whammy!
It's the explicit guarantee that is being removed. The implicit guarantee is probably still there.
Sorry but there is no more implicit. Rememberthe GSEs? Plus structured products with no FDIC or US Guarantee keep T-bill rates low for sometime to come, right?
http://img526.imageshack.us/img526/7837/failederrorgv1.jpg
http://failblog.org/
http://en.wikipedia.org/wiki/Cascading_failure
Hm, too many comments that "at least my capital is guaranteed in a money market, unlike everything out there in danger of default while priced at Libor+100" for the banksters in need of another capital raise very soon?
Pretty funny that a 0.01% MMKT yield isn't enough of a deterent anymore. Or, is it just that the MMKT funds can't afford to pay the cost of Treasury insurance now?
Remove the government guarantee and the only thing that Money Market Funds will have to offer (to borrow a phrase from James Grant) is "return-free risk".
The 7-day simple yield on the average Money Market Fund is a whopping 0.06% -- about as close to ZERO as you can possibly get.
In any event, you will see MM accounts in the near future offered as an accomodation only because they sure don't pay for their own existence.
Couldn't agree more. People still keeping money in MM Funds after the expiration of this guarantee, and especially after what happened last year, are idiots in my book and probably deserve to lose their money. Those who withdraw money and buy stocks with it are even bigger idiots.
Our government masters are desperate to squeeze us out of our cash bunkers by any means possible. If .5% interest has been insufficient motivation, then the risk of complete evaporation of uninvested savings is Plan B .
Plan C is to raise the tax rates on interest income and hold the LT cap gains rate steady. Then jam it in hard to the short-term holders. Just a matter of time.
It's all in the playbook.
what are the odds that this guarantee gets extended?
depends if there is enough msm coverage. if msm covers it and it gets some legs, there will be the potential for large withdrawals. the traditional banks, credit unions will have a magnificent opportunity here to increase their deposit base and I imagine they will take advantage of it.
if i was still in retail banking, i would be taking out full page ads to procure deposits.
To do what, buy bonds, cuz they aren't loaning
right now? The US is now on the wrong end of a carry trade.
Bingo!
The whole point of this exercise is to get the US 'saver' into Treasuries.
Banks are ridiculously overfunded and no longer need deposits, with hundreds of billions sitting idle in Fed reserve accounts.
And with MMMF's paying essentially zero and stripped of their government guarantee, there is only one alternative left -- Treasuries.
Anyone thinking that there is going to be a US Treasury "collapse" any time soon is dead wrong.
Well, perhaps some will exhibit signs of intelligence and buy PM's instead of toilet paper Treasuries with it, but I guess you are right. People probably won't wake up until there is a blowup in the Treasury market or PM's go parabolic or both.
"The whole point of this exercise is to get the US 'saver' into Treasuries."
Yep....and it was nice of obama and company just this week to make it easy for people to have their income tax refunds disbursed as US Savings Bond.....
how about we pay the banks a commission to move fdic insured .00001% deposits into US Savings bonds and do a WW2 type, rosie the riveter marketing campaign?
To do what, buy bonds, cuz they aren't loaning
yep.....that money can easily flow into fdic checking and savings accts, which the banks can pay oh, say, .3% on and pick up the spread. remember, alot of people who have this money do not have the financial acumen of zhers.....saw this movie a bunch of times during my career in retail banking starting in '83....spent time doing alco stuff for a huge player, it's an easy way to make money for a bank.
Kills the ole velocity train though, eh?
correct sir.
i'll also add that the retail brokerage stock jockeys are very worried as their books could get hit by these withdrawals.
that is a sticky question, and los federales face a similar issue with the FDIC-guaranteed debt. If you pull the plug on the guarantee, are you absolutely certain that the market will function normally without it? if you extend the guarantee, what does that say about the Feds' feelings towards the market functioning normally?
Ask yourself: Who will benefit if the guaranty on the money market fund is removed?
Money market fund could be forced into: Banks ( up to quarter million guarantee), stock (risk higher so the perceived return ), treasury (no risk, same low interest). Now who will suffer if money market fund defaults? Yeah, the middle class and the average j6p. You know the answer: The odd is as good as zero.
Obamanomics 101:
Destroy what you cannot regulate!
Divide et impera!
http://www.bloomberg.com/apps/news?pid=20601087&sid=a5O9Upz5e0Qc
Mike Morgan embeded my video. The view counter is stuck at 951, I wonder why?
Warren / Geithner / Goldman Sachs
http://www.goldmansachs666.com/
Keep you out of search engines.
Nailed it...nevermind the ethics of it (it pains me to see google sell out) I have to wonder about the legality as well. Any ideas for the possible illegalities of freezing the view counter?
Why put any money in a Money Market fund when you can the same interest rate in an FDIC insured account.
Plus you can patronize ZeroHedge's sponsor. (Those Capital One ads are hard to miss, but the Huns/Visigoths would grab even more attention.)
Don't blame this on Obama. The govt response has been consistent and is pinned on Bernake. The only thing you can blame partially on Obama is the continued (started with Bush) bailing out of the auto industry. So this is "our govt" issue regardless of who's in charge, because that simply doesn't matter. There is little difference between retards & demos and that's been the case for 20+ years.
Our govt has failed and continues to fail us in looking out for the common good (financial health of the US) and instead bails out the risk takers over and over again. Nothing changes, bubbles form, burst. The rich get richer, the poor poorer and that will never change until our govt truly changes and that won't happen with the two parties we currently have to choose from.
from Wiki
On Monday, September 15, 2008, Lehman Brothers Holdings Inc. filed for bankruptcy. On Tuesday, September 16, 2008, Reserve Primary Fund, the oldest money fund, broke the buck when its shares fell to 97 cents, after writing off debt issued by Lehman Brothers.
The resulting investor anxiety almost caused a run on the bank for money funds, as investors redeemed their holdings and funds were forced to liquidate assets or impose limits on redemptions: through Wednesday, September 17, 2008, prime institutional funds saw substantial redemptions.
Almost time for the 3:30 ramp job...
Bottom line of that bloomberg article.
Incompetant public servants..."They didn't realize this, they didn't realize that, they forgot about such and such" Never before in history (to this enormous magnitude) has someone been sucker punched 6 or 7 times in a row. It's like..."We forgot about this 100 billion, didn't take into account that 30 billion, oops! toatally forgot about those money market funds"
Bailing out Lehman would have prevented the panic but not solved the problem which when it comes down to it was irresponisibility and ignorance.
Bailing out Lehman would have delayed the inevitable, which had to occur at some interval...using some sort of 'arranged bankruptcy' would have been much better perhaps, but it's all hindsight.
It seems to me, that ending another US treasury subsidy / guarantee should be a good development. Money market funds aren't exactly a treasure trove of yieldiness these days, lord knows. It would be mildly idiotic to chance another debacle like the Reserve fund breaking the buck.
Money market balances have been shrinking in an orderly fashion. Thankfully because disorderly would be trouble. The guarnatee isn't worth the bits it's printed with but that's fine because while people know it's a lie there is nothing so reassuring and embraced today as the necesssary lie. I mean if the Treasury said our guarantee is worthless, which everyone knows is the truth, then the public would flee the MM because if you can't trust the Treasury to lie to you who can you trust? Or something like that.
Some are expecting some unsettlement in MM land because of this but I doubt it. People are no anxious to demostrate their firm resolve by doing their part to support a lie.