In the latest of a long list of stunning events, the U.S. Treasury (or really the American taxpayer) is now guaranteeing that money market mutual funds won’t break a buck”. The Treasury said: “For the next year, the U.S. Treasury will insure the holdings of any publicly offered eligible money market mutual fund — both retail and institutional — that pays a fee to participate in the program.”.
Call it the FMMMFIC for Federal Money Market Mutual Fund Insurance Corporation. The limit is set at $50 billion, although that’s probably a fake number. If a run really did emerge on money market mutual funds the Treasury would front even more money.
It’s a good short-term measure to prevent a run on the Wall Street bank. But what happens later on? The genie is out of the bottle. Is the taxpayer going to guarantee $3.5 trillion in mutual fund assets from here on? (As of the latest figures, $1.2 trillion of that is individual investors; the rest is institutional.) In essence, federal insurance has now been extended to one of Wall Street’s major products.
“
“Money market funds play an important role as a savings and investment vehicle for many Americans,” the Treasury said in statement.
Concerns about the value of money market funds falling below $1 have exacerbated global financial market turmoil and caused severe liquidity strains.
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.
