"Rescue Plan for Funds Will Come at a Cost"
"Rescue Plan for Funds Will Come at a Cost," see http://www.nytimes.com/2008/09/20/business/20fund.html. Part of the article is below.
"Emergency steps by regulators on Friday to shore up money-market funds appeared to restore confidence in the $3.4 trillion industry, after a week that raised alarming questions about investments that were long considered risk-free.
But the rescue package also presented new questions for money market funds and their customers. They may soon be facing higher costs, tighter investment restrictions and more complicated regulations.
A key element of the money fund rescue was the Treasury Department’s announcement early Friday to make available, at least temporarily, $50 billion to guarantee money market funds against losses that would force their share prices below a dollar, known as breaking the buck.
This week, a big fund broke the buck because of a stake it held in Lehman Brothers, which is now bankrupt, and many institutional investors have pulled billions of dollars from the industry in the last week.
The steps announced by the Treasury and the Federal Reserve on Friday were aimed at stemming that flood of panicky withdrawals — and, in the short run, they succeeded, fund industry executives said.
“It seems to have restored a sense of normalcy,” said Paul Schott Stevens, president of the Investment Company Institute, a trade association. “I have said that this was supposed to be the Treasury’s version of shock and awe, and it has been.”
But the guarantee plan also drew immediate attack from the American Bankers Association, whose members compete with the money fund industry. The A.B.A.’s leaders warned that the plan could encourage investors to withdraw money from an already stressed banking system to seek higher yields in money funds while the guarantee is in place."
.......http://www.JoeFRocks.com/
NEM XAU HUI
"Emergency steps by regulators on Friday to shore up money-market funds appeared to restore confidence in the $3.4 trillion industry, after a week that raised alarming questions about investments that were long considered risk-free.
But the rescue package also presented new questions for money market funds and their customers. They may soon be facing higher costs, tighter investment restrictions and more complicated regulations.
A key element of the money fund rescue was the Treasury Department’s announcement early Friday to make available, at least temporarily, $50 billion to guarantee money market funds against losses that would force their share prices below a dollar, known as breaking the buck.
This week, a big fund broke the buck because of a stake it held in Lehman Brothers, which is now bankrupt, and many institutional investors have pulled billions of dollars from the industry in the last week.
The steps announced by the Treasury and the Federal Reserve on Friday were aimed at stemming that flood of panicky withdrawals — and, in the short run, they succeeded, fund industry executives said.
“It seems to have restored a sense of normalcy,” said Paul Schott Stevens, president of the Investment Company Institute, a trade association. “I have said that this was supposed to be the Treasury’s version of shock and awe, and it has been.”
But the guarantee plan also drew immediate attack from the American Bankers Association, whose members compete with the money fund industry. The A.B.A.’s leaders warned that the plan could encourage investors to withdraw money from an already stressed banking system to seek higher yields in money funds while the guarantee is in place."
.......http://www.JoeFRocks.com/
NEM XAU HUI
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