US Treasury listen to the Banks re Money Funds

U.S. Department of Treasury headquarters in Wa...Image via WikipediaWhen the scheme to underwrite money market funds was mooted by the US Treasury a few weeks ago with the aim of dissuading investors from making panic withdrawals, I commented here how the banks were understandably annoyed since it put them at a considerable competitive disadvantage.

The details of the scheme which finally aired on Monday had addressed these concerns in a number of ways
  • temporary scheme only lasting 3 months, albeit that will undoutedly be extended if current circumstances prevail
  • only covers investments made up to 19 September i.e. investors who fled/flee to "safety" after this date are not protected
  • Sliding scale fee charged to a fund based on how far below the "buck" the fund is valued at, with lowest rate being 1 basis point [0.01%]
The scheme does provide unlimited protection, unlike for bank deposits which is capped at $100k. It also covers all investors including foreign and institutional ones.

The Treasury payouts will be triggered if a participating fund sees its net asset value fall below $0.995 a share but the fund must be liquidated within 30 days. Investors will receive their capital in full.

It is almost certain that every fund will seek to join the scheme - not because they have to or have problems, but because they need to preserve investor confidence and will not want to cause investors concern by not joining.

Reblog this post [with Zemanta]

Labels: , ,

posted by John Wilson @ 8:31 AM Permanent Link newsvine reddit


Post a Comment

newsvine reddit

Links to this post:

Create a Link

<< Home