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Money market mutual funds
Question: I have been told that I should transfer my cash into treasury money market funds (MMF) to protect them during the current crisis. As of now MMF's are not insured or backed by the goverment. Should I assume that treasury MMF's are safe since they are invested U.S. treasury notes? George, Baltimore, MD
Answer: Right now, the savings parked in money market mutual funds before September 19th is extremely safe. In essence, to stop a modern run on the Wall Street bank--an investor flight from money market mutual funds--the Treasury decided to backstop the $3.5 trillion business with the full faith and credit of the American taxpayer. Call it the Federal Money Market Mutual Fund Insurance Corp.
The regulatory rules of the new insurance fund are still being drawn up, the government is determined the traditional industry pledge that net asset value on money funds won't "break a buck" will hold. The dollar you put into a taxable or tax exempt money market mutual fund before September 19 will be worth at last a buck when you withdraw money from the fund. I've long argued for savers to use the money market mutual funds that invest heavily in Treasuries. Why take a risk with your emergency savings money? You want it stashed in a safe haven.
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Comments (2)
September 26, 2008 9:39 AM PT
What about money that goes in after Sept. 19? I take it this would be a bad time to switch my money from one MMF to another?
September 30, 2008 7:46 AM PT
I also have the same concern; To preserve my assets during the current crisis, I just transferred all of my investment into each MMF inside my variable annunities on last Friday (one week after Setp. 19, 2008). How safe are those MMFs after the Sept. 19, 2008?