The thing about useful stuff is: US Treasury listen to the Banks re Money Funds

US Treasury listen to the Banks re Money Funds Wednesday, October 01, 2008

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.