Released: September 22, 2008

Stopping a run on money market funds

Source: Matt Krantz, USA TODAY

The government’s plan to stop a run on money market funds is stemming the panic but raises questions on whether investors will change how they save.
To stop what was turning into an exodus from the $3.4 trillion pool of money market funds, the Fed said it would lend money to banks, which would, in turn, buy securities from money market funds to provide them cash they may need to pay out to investors. An estimated $200 billion left money market funds last week, says Peter Crane of Crane Data.

The Treasury Department said it would insure money market funds that join the plan by tapping up to $50 billion. Sunday, Treasury said the insurance would cover only amounts that shareholders had in the money funds as of the close of business Friday.

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