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Friday, September 19, 2008

 

treasury to back money market funds


government's day of panic does not end at a new RFC and a jaw-dropping ban on short selling.

The Treasury Department announced Friday it will tap into a Depression-era fund to provide guarantees for the nation's money market mutual funds.

Seeking to deal with a severe financial crisis, the department said that for the next year the U.S. Treasury will insure the holdings of eligible money market mutual funds.

The money to insure the mutual funds will come from the Treasury Department's Exchange Stabilization Fund which was created in 1934 to provide support for the dollar.

Fears were raised about the giant money market mutual fund industry earlier this week when Primary Fund announced that the value of its fund's assets had dropped to 97 cents for each $1 put in by investors, exposing them to losses.

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