Money Market Mutual Fund (Treasury)

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The Money Market Mutual Fund

A Treasury program to guarantee losses on money market mutual funds as of Sept. 29, 2008. The market valuation for those funds, which the government guarantees, was $3,355.3 billion. [1]

Wall Street Bailout Accounting
(back to main table)
MONEY MARKET MUTUAL FUND
Balance Sheet
Disbursed*: $0
Current outstanding: $0
Public Funds
Maximum at-risk: $3,355.3B[2]
Current at-risk:

* See the methodology and glossary for definitions of "disbursed," etc.

Funding agency and aid type

The funding agency was the US Treasury.

Government guarantees against loss.

Who benefits

Investors in money market mutual funds, money market mutual fund managers.

Background

SIGTARP: “Money Market Mutual Fund (“MMMF”) Program — [3]Total Potential Support: $3.4 Trillion. Treasury initiated the temporary Money Market Mutual Fund (“MMMF”) guarantee program on September 29, 2008. The stated intent was to address temporary dislocations in credit markets by guaranteeing “the share price of any publicly offered eligible money market mutual fund — both retail and institutional — that applies for and pays a fee to participate in the program.” According to Treasury, the program provided “coverage to shareholders for amounts that they held in participating money market funds as of the close of business on September 19, 2008. The guarantee will be triggered if a participating fund’s net asset value falls below $0.995, commonly referred to as breaking the buck.” Originally designed to last for three months, the program has been renewed and extended by the Treasury Secretary to run until the close of business on September 18, 2009. Funding for the program was drawn not from TARP funds, but from the Exchange Stabilization Fund, which was established by the Gold Reserve Act of 1934. The Exchange Stabilization Fund has assets of approximately $50 million, and the total exposure of the MMMF program is theoretically approximately $3.4 trillion — the total amount of money market mutual funds outstanding as of the third quarter of 2008, when the program was created.”


Notes

Via Prins: “The temporary guarantee program provides coverage to shareholders for amounts that they held in participating money market funds as of the close of business on September 19, 2008. The guarantee will be triggered if a participating fund’s net asset value falls below $0.995, commonly referred to as breaking the buck. All money market mutual funds that are regulated under Rule 2a-7 of the Investment Company Act of 1940, maintain a stable share price of $1, and are publicly offered and registered with the Securities and Exchange Commission will be eligible to participate in the program. Total exposure of the MMMF program is theoretically $3.7 trillion, the total amount of money market mutual funds outstanding as of the first quarter of 2009.”[4]

Prins: “In September 2008, the Treasury announced that it would insure the holdings of publicly offered money market mutual funds. According to the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), these guarantees could have potentially cost the federal government more than $3 trillion.” [5]

[Note: This analysis seems flawed and does not agree with SIGTARP, which dates the valuation of money market mutual funds to Sept. 29, 2008, the effective date of the program.]


Articles and resources

Related SourceWatch articles

References

  1. SIGTARP July 2009 report, p. 152.
  2. Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), “Quarterly Report to Congress – July 21, 2009,”[ http://www.sigtarp.gov/reports/congress/2009/July2009_Quarterly_Report_to_Congress.pdf] p. 152.
  3. SIGTARP July 2009 report, p. 153.
  4. U.S. Department of the Treasury, “Treasury Announces Temporary Guarantee Program for Money Market Funds,” press release: hp-1161, September 29, 2008, http://www.treas.gov/press/releases/hp1161.htm; U.S. Office of SIGTARP, Quarterly Report to Congress July 2009, July 21, 2009, p. 141, http://sigtarp.gov/reports/congress/2009/July2009_Quarterly_Report_to_Congress.pdf; U.S. Department of the Treasury, “Treasury Announces Extension of Temporary Guarantee Program for Money Market Funds,” press release: TG- 76, March 31, 2009, http://www.ustreas.gov/press/releases/tg76.htm; Board of Governors of the Federal Reserve System, Flow of Funds Accounts of the United States, Flows and Outstandings First Quarter 2009, June 11, 2009, p. 85, http://www.federalreserve.gov/releases/z1/Current/z1.pdf.
  5. Prins’ Mother Jones analysis. Dec. 21, 2009. http://motherjones.com/politics/2009/12/behind-real-size-bailout

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