Treasury Dept. Wants to Buy Toxic Banker Debt
JEANNINE AVERSA and JULIE HIRSCHFELD DAVIS
Associated Press
September 19, 2008
Urgently moving on multiple fronts to stem the worst financial crisis in decades, the government on Friday said it would safeguard assets in money market mutual funds and temporarily banned short-selling of financial company stocks. The Treasury Department asked Congress to give it sweeping power to buy up toxic debt that has unhinged Wall Street.
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President Bush authorized Treasury to tap up to $50 billion from a Depression-era fund to insure the holdings of eligible money market mutual funds. And the Federal Reserve announced it will expand its emergency lending program to help support the $2 trillion in assets of the funds.
Both moves are designed to bolster the huge money market mutual fund industry, which has come under stress in recent days.
The Fed said it is expanding its emergency lending efforts to allow commercial banks to finance purchases of asset-backed paper from money market funds. The central bank’s move should help the funds meet demands for redemptions.
The Securities and Exchange Commission early Friday imposed a temporary emergency ban on short-selling of financial company stocks, a trading method that bets the stocks will go down. As the financial crisis widened, entreaties had come from all quarters to stem a swarm of short-selling contributing to the collapse of stock values in investment and commercial banks.
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