Saturday, September 20, 2008

Treasury Announces Guaranty Program for Money Market Funds

If you've been totally focused on your Cintiq over the past week, you might not have noticed that the World and American economies have been going through ... ah ... serious gyrations.

So to let you know, the world and U.S. econmies have been having hiccups.

We've gotten nervous inquiries about whether Mass Mutual, our 401(k) administrator, is safe, if the various funds in the Plan are safe, and so on.

Here's some of the skinny: Mass Mutual can go into bankruptcy tomorrow and it won't affect the cash held in our various funds, since by law those are all held separate and apart.

Obviously, if different funds decline in value because of equities or bonds held in those funds, you will lose money. That's the way the market -- usually -- works *.

But the good news is: if the administrator goes under, it won't adversely impact anybody's fund holdings.

What follows is an announcement from the Treasury Department about the type of fund accounts it intends to backstop ... inside or outside 401(k) Plans. Those funds are called "Money Market Funds" and TAG's 401(k) Plan does not currently have any "money market" accounts in its line-up of funds. The closest thing that we have is Mass Mutual's "SAGIC Account," and we are in the process of finding out how the U.S. Treasury's new "Guaranty Program" (detailed below the fold) will impact it.

In the meantime, read Treasury's press release, and gain reassurance that we are on the right track under the sure and steady hand or our Leaders in D.C.

September 19, 2008

Treasury Announces Guaranty Program for Money Market Funds

Washington- The U.S. Treasury Department today announced the establishment of a temporary guaranty program for the U.S. money market mutual fund industry. For the next year, the U.S. Treasury will insure the holdings of any publicly offered eligible money market mutual fund – both retail and institutional – that pays a fee to participate in the program.

President George W. Bush approved the use of existing authorities by Secretary Henry M. Paulson, Jr. to make available as necessary the assets of the Exchange Stabilization Fund for up to $50 billion to guarantee the payment in the circumstances described below.

Money market funds play an important role as a savings and investment vehicle for many Americans; they are also a fundamental source of financing for our capital markets and financial institutions. Maintaining confidence in the money market fund industry is critical to protecting the integrity and stability of the global financial system.

Concerns about the net asset value of money market funds falling below $1 have exacerbated global financial market turmoil and caused severe liquidity strains in world markets. In turn, these pressures have caused a spike in some short term interest and funding rates, and significantly heightened volatility in exchange markets. Absent the provision of such financing, there is a substantial risk of further heightened global instability.

Maintenance of the standard $1 net asset value for money market mutual funds is important to investors. If the net asset value for a fund falls below $1, this undermines investor confidence. The program provides support to investors in funds that participate in the program and those funds will not "break the buck".

This action should enhance market confidence and alleviate investors' concerns about the ability for money market mutual funds to absorb a loss. Investors in money market mutual funds with a net asset value that falls below $1 would be notified that their fund triggered the insurance program.

The Exchange Stabilization Fund was established by the Gold Reserve Act of 1934. This Act authorizes the Secretary of the Treasury, with the approval of the President, "to deal in gold, foreign exchange, and other instruments of credit and securities" consistent with the obligations of the U.S. government in the International Monetary Fund to promote international financial stability. More information on the Exchange Stabilization Fund can be found here.

* I, of course, exempt those stocks, bonds and companies that the fine socialist government in Washington D.C. has nationalized. That's a different deal.


Anonymous said...

We have never emerged from the malaise of 1968 - remember the real US economy, the death of the gold standard?

Reagan bluffed his way out of it, Clinton strolled his way through the fantasy, Bush and Co. have for 8 years desperately tried to pretend it still existed and urged everyone to shop and leverage themselves to bankruptcy. It is still 1968 everyone. Welcome back to reality. It is going to be a long, dreary march through the new global order.

Steve Hulett said...

Now that George and Hank Paulson have nationalized the losses of all the highly-leveraged bad bets, about the only thing you can say is:

"We're all Socialists now."

Steve Hulett said...

... remember the real US economy, the death of the gold standard?

I believe that Nixon took us off silver (got rid of "silver certificates"), as FDR took us off gold.

The biggest problem is, we're printing money. Trillion dollars for Iraq, another trillion for all the bad debt, and pretty soon you're talking about serious moolah.

Anonymous said...

It's interesting how we suddenly have billions of dollars to spare to bail out financial institutions who knowingly made bad deals, but we can't seem to figure out a way to make sure all Americans have access to quality health care.

Anonymous said...

Uh, huh. And who's going to pay for that "access to quality health care"? Talk about a bad deal - just ask the Canadians or the British. You want the truth about the current mess? Democrats forced loan companies to give loans to low-income families who didn't have a chance of paying them off, in order to be "fair" to them. See how much better off those families are now! And when McCain tried to introduce a bill back in 2005 that would have kept a closer eye on Freddie Mac and Fannie Mae, it got voted down by a majority of Dems. And people want to put MORE of those fools in power, even in the White House? Pah. Beats me how so many people have gotten so seduced by such a shallow, pretty-boy egotist like Obama. As an independent, I'm all for change too - as long as it isn't change for the worst!

Anonymous said...

Politicians don't force people to take loans. Global economic realities do. Join this millennium, please.

Anonymous said...

somebody's pretty pissed off they didnt get their republican sanctioned, made in china Palin "eyeglasses!"

yeah vote McSame, I mean McCain and really see the last gasp of the american empire, more wars and who knows what other nightmare they can dream up...

Anonymous said...

Uh, huh. And who's going to pay for that "access to quality health care"? Talk about a bad deal - just ask the Canadians or the British.

Yes, please, let's ask the Canadians.

My Canadian in-laws have enjoyed great health care and greater financial security than most Americans because of Canadian health insurance. When my brother-in-law broke his leg while skydiving, the emergency care, surgery and cast inconvenienced him, but they did not bankrupt him. When my aunt-in-law required double bypass surgery, she didn't lose her house or savings to medical bills. She got excellent surgery, good medical care, recovered fully, and still does fine now.

A Canadian boasted on the Animation Nation forum that his wife got top-flight cancer treatment for the cost of parking.

I can only dream of a "bad deal" like that here in the States.


Meanwhile, I know an American whose uninsured sister lost her leg because her cancer went untreated for far too long. The hospitals would not treat her cancer without insurance -- they'd merely stabilize her with the most minimum of treatments and send her home. Only after this American citizen lost every penny she had did Medicaid kick in and a Medicaid-paid doctor started giving her genuine treatment. He saved her life, but at far greater cost to both taxpayers and the patient than if Medicaid had stepped in at an earlier stage of her cancer.

Anonymous said...

I have never seen more government intervention and 'rescue' than in the last eight years - wars for 'security', off-shore 'detention centers' for security, massive federal emergency funds for disasters after disaster, airline bailouts, 'free market' energy empire collapses and bailouts, and now real estate and financial collapses and bailouts.

And these are free market, small government REPUBLICANS?!?!

Rove put into office by far the most corrupt and stupidest people on the planet. It is a tragedy of the most gargantuan proportions.

Is there evil? Yes - but only the type bible-thumping crusading born again morons create.

Steve Hulett said...

See how much better off those families are now! And when McCain tried to introduce a bill back in 2005 that would have kept a closer eye on Freddie Mac and Fannie Mae, it got voted down by a majority of Dems.

Ah yes, this is ALL the Democrats fault! The problem with the analysis, my fine GOP concern troll, is that in 2005, when Mr. DeRegulation was fighting the good fight, the Republicans controlled:

A) The White House

B) The Senate

C) The House of Representatives.

You can look it up. It's all there on The Google.

To be clear, I don't absolve the Dems from being participants in this fustercluck, but let's focus on the main players, which are ...

The Prez, Alan Greenspan, Phil Gramm, the leaders of House and Senate, Bill Clinton and Robert Rubin (who went along with deregulation in the nineties). Christopher Cox of the SEC, and assorted investment banks, mainline banks, and loan brokers.

I guess all the true believers in "the magic of the marketplace" stopped believing earlier this week.

Ah well ...

Steve Hulett said...

Re Health Care:

The U.S., by far, spends more per capita on health care than any other industrialized nation, and we are nowhere near the top regarding outcomes.

Canada is way better. Western Europe way better.

The problem with Right Wingers on this issue is the stats are against them, so they ave to resort to "scary anecdotes."

And when they scream "Socialized Medicine!" feel free to rejoin:

"Ah, you conservatives, you only believe in socialized financial institutions ... to the tune of $700 billion. But medicine? That's off the table?"

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