I want to keep you all up with the latest action in Washington regarding protecting your savings. I taped a recent appearance on The Oprah Winfrey Show on the morning of Thursday, September 18, 2008, right in the midst of much market turmoil. On the show, I told you all that money market funds you buy through brokerages and mutual fund companies are not insured the same as money market accounts that you buy at an FDIC-insured bank.
The show did not air until Tuesday, September 23, 2008. And between when I taped the show and it aired, the U.S. Treasury Department announced a plan to set up a guarantee fund for money market mutual funds (MMMFs).
The reason the Treasury took this unprecedented step is that there was a huge run on MMMF accounts. After one fund "broke the buck" and told investors they would lose 3 cents for every dollar invested, it sent off shock waves. Concerned investors decided to bail out of their uninsured money market funds and move their money into safer savings vehicles. ) It indeed makes a lot of sense to move into an FDIC-insured bank account or simply shift money from regular MMMFs into a Treasury MMMF offered at your existing broker or fund company. A Treasury MMMF doesn't have implicit insurance, but it doesn't need it, because it invests in securities issued by the U.S. government. Your money has the super safe backing of the "full faith and credit" of the U.S. government.
Okay, so now that the Treasury has stepped in, can you stop worrying?
While it is clear that the Treasury is motivated to prevent any consumers from losing money in a MMMF account, the details of the guarantee plan have yet to be worked out, so it is not clear exactly what and what will not be protected by the U.S. government.
All we know right now as of this scoop is this:
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