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Thursday, November 20, 2008
Treasury to Help Liquidate Money Market Firm's Fund
By Dunstan Prial
FOXBusiness
The Treasury Department said Thursday it has reached an agreement with money market firm the Reserve Fund to assist in liquidating one of the firm’s funds.
The firm shook the financial world in September when news broke that one of its funds had “broken the buck,” meaning the value of its shares had fallen below $1, an extremely rare occurrence.
A few days later, after a rush of redemptions by Reserve Fund investors, the company suspended redemptions on orders from the Securities and Exchange Commission.
Under the Treasury plan announced Thursday, which targets the Reserve Fund’s U.S. Government Fund, the fund has 45 days to sell assets.
After that, Treasury can purchase any remaining securities at amortized cost, so that shareholders are paid back $1 for every share they own and the fund does not “break the buck.”
Treasury said its total exposure is $5.6 billion.
“This extraordinary action is in response to the unique situation of (Reserve Fund’s) money market fund,” Treasury said in a statement.
In the wake of the Reserve Fund redemptions, Treasury set up a program to backstop all investments in money market funds.
Treasury said no other funds participating in that program have been forced by the SEC to suspend redemptions.
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