Treasury pulls out stops to support money markets

Mark Felsenthal
Reuters
September 19, 2008

U.S. officials rushed to shore up ailing money markets on Friday after signs that this long-safe corner of financial markets, home to some $3.5 trillion of deposits, was at risk of falling victim to the year-old credit crunch and bring the crisis to Main Street.

The U.S. Treasury Department said it would use $50 billion to back money market mutual funds whose asset values fall below $1 a share. Separately, the U.S. Federal Reserve said it would lend even more money directly to financial institutions so they could purchase certain assets from money market funds.

The latest government efforts come after the credit crisis, which had largely been seen as problem for Wall Street risk takers, threatened to spill over into Main Street after some super-safe money market funds buckled.

“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,” the Treasury said in a statement.

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