US TREASURY TO OFFER MONEY MARKET FUND GUARANTEES
The U.S. Treasury announced a temporary guaranty program for investors in money market funds where the NAV falls below $1.00 following the liquidation of the fund. The program is only available for one year and only to funds that pay a fee. Although the amount payable is not capped, only $50 Billion in the aggregate has been made available from the Exchange Stabilization Fund.
OUR TAKE: This program may be more a vote of confidence than real financial support. The Treasury has authorized $50 Billion as insurance for more than $3.4 trillion in money market mutual fund assets. One fund collapse may use up the program. Also, it only applies if the fund decides to liquidate. However, draws on the guarantee may be limited because many of the securities held by money funds are government securities already backed by the full faith and credit of the U.S.