Money Market Funds

So Fidelity sent me a nice email telling me that it seems that the Federal Government has stepped in and provided emergency backing for all participating MM funds, and indicating that Fidelity had opted in to this program. The details are that this is a 3-month program that guarantees share equity value at $1 for all shares owned in participating MMF as of Sept 19, 2008. The program expires Dec 18, 2008.

Who knew? When did this happen? Where does this leave the flood of equity cash outs sitting in MMF sweep funds in brokerages all post 9-19? How big is the threat to MMF value? What is the sell volume on MMF these days, are they in danger of insolvency from withdrawals?

I am beginning to feel like a blind man standing on a precipice trying to gauge its depth by tossing rocks and listening for the impact.

discussed is several places, and basically, the Feds are giving the same guarantee on MMF's as they give to your bank account, and as far as I know, that guarantee has the same limits as your bank account has.

http://www.treasury.gov/press/releases/hp1163.htm

This differs from FDIC in at least two other ways: 3-months time limit, only shares of record as of 9-19 covered. As the link is just an FAQ, I have no idea what other details are lurking in the actual program.

The fact that the feds have quietly implemented an emergency insurance system for MMFs is a bit alarming. They would not have done this if there wasn't a real threat of a MMF crash. What else aren't they telling us?

a MMF "broke the buck". That's what triggered the credit freeze and the push for the bail-out.

It's been public, talked about for a couple weeks now. C'mon, be reassured, they want you to be reassured.

FWIW, I have some money in Fidelity MM funds, and I'm not moving it (so far). By the time money market funds start going down in any numbers at all, there is going to be no safe haven.

worried about everyone pulling all their $$ out of the market en mass. People were talking about paying the penalties but pulling all their $$ out of everywhere and keeping it under their matress! It was a way to put at lease SOME trust in one small segment of the market.

not too sure about the absence of a cap on the amount insured. Will have to look into that.