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The portion of the money market fund industry that suffered extreme disruptions during the financial crisis would be revamped under a plan proposed Wednesday by federal regulators, who have been struggling to address the industry’s vulnerabilities for years. The Securities and Exchange Commission unanimously approved the proposal after what SEC Chairman Mary Jo White described as a “journey.” The industry once fiercely opposed dramatic changes to money market funds, but regulators persisted, citing the losses and panic they sparked during the financial crisis. These types of mutual funds are popular with investors because they’re perceived to be as reliable as...

Money-market funds, thought to be one of the safest investments, are actually some of the most dangerous. They are still vulnerable to the same kind of bank run that nearly pushed the global economy over the brink in 2008, and there’s no plan by the industry or by its regulators to fix that vulnerability. The money-market funds are smaller than they were in 2008, but if anything, they are riskier. Current U.S. law prohibits the kind of federal guarantee that, in 2008, stopped the bank run before it could bring down the financial system. The next run on these shadowy...

Two years ago, in January 2010, Zero Hedge wrote "This Is The Government: Your Legal Right To Redeem Your Money Market Account Has Been Denied" which became one of our most read stories of the year. The reason? Perhaps something to do with an implicit attempt at capital controls by the government on one of the primary forms of cash aggregation available: $2.7 trillion in US money market funds. The proximal catalyst back then were new proposed regulations seeking to pull one of these three core pillars (these being no volatility, instantaneous liquidity, and redeemability) from the foundation of the...

Here's something you won't see talked about much - unless you dig for it. Zerohedge covered it - the fact that money markets are no longer guaranteed liquid. But look at what The Wall Street Journal had to say: Money-market funds could be forced to pay out less interest under new federal rules designed to make them sturdier. With memories still raw from the 2008 meltdown of Reserve Primary Fund, the Securities and Exchange Commission released rules on Wednesday that require funds to hold more liquid and higher-quality assets and disclose the value of their assets per share more frequently....

Zero Hedge discussed a month ago the disastrous prospects of what would happen if the new proposal contemplated by the SEC, which would allow the suspension of redemptions from Money Market Funds, were to pass. Well, in a nearly unanimous vote, Money Market Funds now have the ability to suspend redemptions, courtesy of the SEC's just passed 4-1 vote. This explains the negative rate on bills: at this point, should there be another meltdown, money market investors will not, repeat not, be able to withdraw their money purely on the whim of Mary Schapiro. As the SEC noted: "We understand...

Treasury's money market fund guarantee just expired. Where to go for safety? A little over a year ago the collapse of Lehman Brothers sparked heavy redemptions from the dozen or so money market funds that held Lehman debt securities. The hit was particularly hard at The Reserve Fund, a money market fund that had a $785 million position in Lehman commercial paper. Soon The Reserve saw a run on its Primary Fund, spreading to other Reserve funds. Reserve tried to furiously sell its portfolio securities to satisfy redemptions, but this only depressed their values. Despite its best efforts, The Reserve...

US no longer insures your money-market fund, but that’s good news Withdrawing federal insurance is part of a broader exit strategy from the government's emergency supports for the economy, expected to gather steam this year. ### Savers take note: Your money-market fund is no longer insured by the US Treasury. These mutual funds, which earn interest for millions of Americans in brokerage or 401(k) accounts, rarely run into financial trouble. Almost always, they are able to maintain a reliable value of $1 per share. “Almost” is the key word, though. Last year, one of the original money-market funds, the Reserve...

A little over a year ago the collapse of Lehman Brothers sparked heavy redemptions from the dozen or so money market funds that held Lehman debt securities. The hit was particularly hard at The Reserve Fund, a money market fund that had a $785 million position in Lehman commercial paper. Soon The Reserve saw a run on its Primary Fund, spreading to other Reserve funds. Reserve tried to furiously sell its portfolio securities to satisfy redemptions, but this only depressed their values. Despite its best efforts, The Reserve Primary Fund couldn't find enough buyers and on Sept. 16 the unthinkable...

Money funds, once considered a safe place to park cash, could become moderately risky again when the government program hastily initiated last year to guarantee money fund deposits expires on Sept. 18. In 2008 the colossal Reserve Primary Fund, with $62.5 billion in its portfolio "broke the buck" when Lehman Brothers defaulted on $785 million in bonds which the fund held. Investor redemptions skyrocketed. This prompted then Treasury secretary Henry Paulson's unprecedented intervention to protect all money market assets, approximately $3.5 trillion, and thus avert a panic, writes Joe Nocera in The New York Times. "Here we are a year...

In all the inevitable hoopla surrounding the coming anniversary of “Lehman weekend” — those fateful days in mid-September 2008, when the financial world seemed on the brink of collapse — here’s an important event that will almost surely be overlooked: On Sept. 18, just a few days after the anniversary, the Treasury Department will end a program that essentially gave the same kind of protection to money market investors that the Federal Deposit Insurance Corporation gives to bank depositors. The government guaranteed that investors wouldn’t lose a penny. When the program was instituted a year ago, you’ll recall, the Reserve...

On Thursday [the 18th], at about 11 o’clock in the morning, the Federal Reserve noticed a tremendous drawdown of money market accounts in the United States to a tune of $550 billion being drawn out in a matter of an hour or two. The Treasury opened up its window to help. They pumped $105 billion into the system and quickly realized that they could not stem the tide. We were having an electronic run on the banks.

The funds arm of Swiss bank Credit Suisse plans to quit managing U.S. money-market funds and is liquidating three funds that have about $8 billion in assets, according to regulatory filings. The funds being shut are the $6.9 billion Prime Portfolio, the $581 million Government Portfolio and the $574 million Cash Reserve Fund, filings by the funds on Dec. 15 to the Securities and Exchange Commission show. The funds said in the filings the reason for the liquidations was that Credit Suisse Asset Management "intends to cease managing U.S. money market funds in the near future." The funds are expected...

The Federal Reserve announced Tuesday that it will provide up to $540 billion in financing to bolster the money market mutual fund industry, its latest effort to get credit flowing more freely again. The Fed's new program, called the Money Market Investor Funding Facility, will be used to support a private-sector initiative designed to provide liquidity, or cash, to money market investors. The Fed plans to back purchases of short-term debt including certificates of deposit and commercial paper that expire in three months or less from money market mutual funds. The funds are large buyers of commercial paper and CDs,...

One of the original and largest money market funds has put a seven-day freeze on investor redemptions after the net asset value of its shares fell below $1, in a rare instance in the fund industry of what is called "breaking the buck." Primary Fund (RFIXX), managed by New York-based money market fund inventor The Reserve, said late Tuesday that its $785 million holding of Lehman Brothers Holdings debt has been valued at zero. As of 4 p.m., Eastern, the value of the fund's share was 97 cents. The Reserve said that redemption requests received before 3 p.m. will be...

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...