Money market guarantee program expiring (Heads up notice for Sept 18,2009)

sfgate ^ | 09-10-09 | Kathleen Pender

[blueyon]

The government's temporary guarantee program for money market funds is set to expire on Sept. 18. There is little chance the year-old program, put in place during the height of the financial crisis, will be extended past next week.

The guarantee applies only to money funds that paid premiums to participate in the Treasury Department's insurance fund. Almost all funds did initially, although some that invest only in U.S. government securities later dropped out. The guarantee covered balances that were in participating taxable and tax-free money funds when the program started Sept. 19.

"It's extremely unlikely" the program will be extended past next week, says Mercer Bullard, president of Fund Democracy. "The whole idea is for it to quietly expire unnoticed."

[blueyon]

O K this is scary!

[blueyon]

here’s a link to the March 13 2009 Treasury notice extending it until Sept 18 2009
http://www.treas.gov/press/releases/tg76.htm

[nmh]

Oh, oh ...

Excerpt

‘Destabilizing influence’

The government “suddenly realized that money market funds have a potentially destabilizing influence” on the economy, says Barb Roper, the Consumer Federation of America’s investor protection director. The money fund guarantee program “had reasons beyond investor protection.”

The program helped stop the run. To prevent a repeat, the Securities and Exchange Commission has proposed rules that it says would “increase the resilience of these funds to economic stresses and reduce the risks of runs.”

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/09/09/BU6K19KNOF.DTL&type=business#ixzz0R20vwJUT

[Army Air Corps]

Ping.

[nmh]

Excerpt:

In the meantime, should investors worry?

Bullard says that while the odds of another fund breaking the buck are remote, the best place for money you can’t afford to lose is a federally insured bank deposit.

Crane says that investors who remain in money funds face little risk. “Could we have another run? It’s always possible, but I don’t think the Fed, Treasury or other parties would allow that to occur. If needed, the Treasury guarantee program would be legislated into existence.”

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/09/09/BU6K19KNOF.DTL&type=business#ixzz0R21DsxS6

[TheZMan]

I’m not a financial wiz by any means, but is this related to the “billions yanked from electronic funds in a couple hours” bit from a year ago, and is the policy that will be expiring the one that stopped the run?

[pabianice]

The Left’s inability to deal with conservative anger means the end of the Left. Yes!

[SAJ]

This is probably -- emphasis, probably -- a non-story. If, however, we should see the same sort of electronic mopery and dopery as last year, then we will know that the fit has hit the shan.

I don't think we will see it, though. Large financial players, while still not nearly sound, are A) not collapsing, as was the case last year, and B) in considerably better shape than might be, insofar as a LOT of toxic 'assets' (haha) have been removed from their books.

Meantime, I'm long the 10-year notes with calls written against. We shall see, as ever. Very interesting how the 30-years have WAY outperformed the 10-years for the past couple of weeks.

[PGalt]

Thanks for posting. Very interesting. Two very good comments at the site.

[GOPJ]

I hope there’s not a panic.

[GOPJ]

I’m not a financial wiz by any means, but is this related to the “billions yanked from electronic funds in a couple hours” bit from a year ago, and is the policy that will be expiring the one that stopped the run?

yep - that's the one...

[TheZMan]

I wonder if we’ll never know the truth. You know, the stuff behind the veil. I can’t decide whether to worry about it’s expiration or if the original run was fabricated, etc.