EMERGENCY: NON-FDIC INSURED MONEY MARKET FUNDS NOW AT RISK OF FAILING
September 17th, 2008“Is Your Money Market Fund the Next Subprime Mortgage Debacle?”
Holy shit.
Via: Yahoo:
In a sign of how the financial crisis is hitting small investors, a huge money-market fund, the Reserve Primary Fund, announced Tuesday that it lost money as its net asset value fell below the hallowed $1-per-share level, the first time one of these conservative funds has had a loss in 14 years.
The culprit was debt securities it holds issued by Lehman Brothers Holdings Inc.
The news raised the prospect more losses might be in store for other money-market funds holding paper from Lehman, which collapsed Monday, and from other problem-ridden firms. As of Friday, the Reserve Fund had assets of around $62 billion, but they have fallen considerably since.
The development “is really, really bad,” said Don Phillips, one of the founders of Morningstar Inc. “You talk about Lehman and Merrill having been stellar institutions but breaking the buck is sacred territory.”
The Reserve is a New York cash-management firm that prides itself on creating the first money-market fund. It has dubbed itself “the world’s most experienced money fund manager” with $125 billion in assets through June. It didn’t return calls for comment.
The Reserve Primary Fund isn’t the only money market fund that’s struggling:
On the heels of the Primary Fund’s announcement, Standard & Poor’s cut its credit rating from the highest for money-market vehicles, AAAm, to Dm, the lowest.
One much smaller money fund under the Reserve’s banner, the International Liquidity Fund Ltd, also dropped below the $1 standard. That fund is available only to offshore investors. Separately, a money-fund-like investment pool for municipalities not managed by the Reserve, Colorado Diversified Trust, also “broke the buck,” but S&P reported that it will be folded into another Colorado entity. S&P downgraded both the International Liquidity and Colorado Diversifed funds as well, from AAAm to Dm.
In addition, S&P put nine other money funds sponsored by Reserve Management Corp. on credit watch for possible downgrade.
This whole thing really is turning into the financial equivalent of The Day After, isn’t it? π
After reading this ( and changing my undergarments) I read the prospectus re Mom’s money market. I have been given “assurances” by the brokerage that holds our money market account that the money is insured by something other than the FDIC. Can’t find by who in the small print. The BIG print says NOT INSURED.
I have come to the point where I believe that nothing in dollars is secure unless in hand, under the mattress, or some other undisclosed location – probably until at least January 09.
Now to convince the other decision makers in my family of the same. Will be holding my nose and diving in.
“I have come to the point where I believe that nothing in dollars is secure unless in hand, under the mattress, or some other undisclosed location”
Haha, when we get to the point that people start using their mattress as a “savings account”, we will know that Great Depression 2 is underway. The reason the last one lingered on for 10 freakin’ years is because people lost all faith in the financial system. And lets face it, nothing says “I don’t trust the fiancial system” like stuffing your life savings in a mattress or burying it in hole you dug next to the dog house in the backyard.
# Loveandlight Says:
September 17th, 2008 at 6:18 pm
This whole thing really is turning into the financial equivalent of The Day After, isnβt it? π
more akin to the British version “Threads”
http://en.wikipedia.org/wiki/Threads