Posted on 09/17/2008 4:17:31 AM PDT by oblomov
NEW YORK (Reuters) - Reserve Primary Fund, a money-market mutual fund whose assets have tumbled 65 percent in recent weeks, fell below $1 a share in net asset value, because of its losses on debt issued by Lehman Brothers Holdings Inc. (LEH.N: Quote, Profile, Research, Stock Buzz).
In the industry, money funds whose net assets drop below $1 a share are said to have "broken the buck".
The Reserve Primary Fund had about $23 billion in assets on Tuesday, down from about $65 billion in assets as of August 31, said fund spokesman Ming Lee Hatch.
Investor redemptions will be delayed as long as seven days, the fund's owner, New York-based Reserve Management Corp., said Tuesday in a statement.
The fund's chairman, Bruce Bent, is known as the "father" of money funds, after creating the first money market mutual fund in 1970 with a partner.
(Excerpt) Read more at reuters.com ...
One more money fund breaking the buck and there will be a run.
Coincidentally, I took all my money out of my money funds yesterday, as Schwab checking is now offering a much higher interest rate.
I guess the big question is, how many of these funds are exposed (indirectly) to the mortgage crisis.
Be careful. Higher interest rates usually mean higher risk — the borrower is more desperate.
Happened at Evergreen, but Wachovia (parent) backed them up.
Right, but this is in an FDIC insured checking account.
“The only truly safe place at the moment is in US treasuries held to duration, CDs held to duration, checking accounts, and savings accounts. The CDs, checking accounts, and savings accounts have an additional stipulation that they must be under the FDIC limit.”
http://globaleconomicanalysis.blogspot.com/
ALERT-—Second money fund breaks the buck———Colorado Diversified Trust.MarketWatch article,so no link.
This fund had a lot of exposure to Lehman as well.
Did the US Government pressure or force anyone to make high risk home loans that lenders otherwise would not have made?
Why use pressure when you can set interest rates stupidly low, look the other way on fraudulent ratings and fake insurance for mortgage backed securities, and tout and encourage all those new financial innovations? Because of that, the default risk was priced absurdly low and the lenders and borrowers just went along for the ride.
I remember in the late 90’s/early 00’s Jesse Jackass and his host of race mongers were demanding Wall Street issue easy credit.
Now, did Wall Street/FNMA start issuing these stupid loans on their own (b/c of low interest rates, or whatever reasons they had) or were they under direct pressure from the US Federal Government to make these poor loan decisions.
It’s all part of the same game, risks were priced too low for lots of reasons, through direct intervention like mandatory loans in the shady parts of town, interest rates forced lower at the short and medium ranges, and the whole mortgage back securities scam. Meanwhile the systemic risk grew sky high (as many here warned about) and that is what is forcing the Fed to plow through 600B out of 800B so far. Fannie and Freddie were too big for the Fed even without the other backstopping they are doing. A link here earlier showed the Fed bailed out JPM for 87B of Lehman junk.
It's interesting that very few 401K plans offer such a fund as an option - it's commercial paper or nothing.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.