This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Fed, Treasury Aid Money Market Funds

Updated from 8:51 a.m. EDT.

The Federal Reserve said Friday it would extend non-recourse loans to depository institutions and bank holding companies to finance their purchases of high-quality, asset-backed commercial paper from money market funds to help them meet redemptions.

With the move, the Fed joins the Treasury Department in trying to restore confidence to a market generally regarded as being almost as safe as cash. The Treasury established a temporary guaranty program for U.S. money market funds, saying it would insure for the next year the holdings of any publicly offered eligible money market mutual fund -- both retail and institutional -- that pays a fee to participate in the program. Details on the fee haven't been disclosed yet.

Funds Fighting to Stay at a Buck

The development comes as Putnam Investments announced that it was closing and liquidating its Prime Money Market Fund, a $12 billion professional fund. The fund didn't have exposure to the recent troubled financial institutions, but instead suffered from "significant redemption pressure." In just one week, the Investment Company Institute, a trade group that works with funds, said assets in funds serving institutions dropped to $2.17 trillion, a decline of $173 billion.

Also this week, a money market fund from Reserve Management Company "broke the buck" when its net asset value dropped below one dollar. In a statement, the fund said that redemptions could face a seven-day delay and transactions from investors could not exceed $10,000.

Money market funds, according to one bond salesman, were experiencing what was akin to a run on a bank. "The companies are trying to shore up their funds with their own money as investors are trying to get out while they can," he said.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,387.21 -291.49 -1.65%
S&P 500 2,029.55 -27.54 -1.34%
NASDAQ 4,681.4970 -90.2660 -1.89%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs