Treasury to protect money market funds

Sep 19, 2008 @ 9:30 am

By Sue Asci

The Department of the Treasury announced today that for the next year, it will insure the holdings of any publicly offered eligible money market mutual fund that pays a fee to participate in the program.

The agency received approval from President Bush to use the assets of the Exchange Stabilization Fund.

The program may use up to $50 billion to guarantee the funds.

“Concerns about the net asset value of money market funds’ falling below $1 have exacerbated global financial market turmoil and caused severe liquidity strains in world markets,” the Treasury Department wrote in a statement.

Under the program, if a fund’s net asset value falls below $1, it will be notified that it has triggered the insurance program.

The Exchange Stabilization Fund was established by the Gold Reserve Act of 1934.

The act allows the secretary of the Treasury, with approval from the president, to “deal in gold, foreign exchange and other instruments of credit and securities” to promote international financial stability.


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