Sunday, September 21, 2008

Money Markets Faced $500 Billion In Redemption Requests Last Thursday Morning

With news last week Tuesday that Primary Reserve Fund had "broken the buck", rumors started to fly in a very nervous market and, by Thursday morning of last week, financial institutions began to put in redemption requests by the hundreds of millions for their funds at money market mutual funds. In total, according to NyPo, $500 billion in redemption orders were sitting on the desks at money market fund offices that morning.

Only a quick injection into the system of $105 billion by the Fed prevented the redemptions from being exercised.

The injection of capital into the market was followed up by calls from Treasury Secretary Hank Paulson to major money market players like Bank of New York Mellon and State Street in Boston informing them that federal money was in the market and they should tell their clients the Feds would be back with a plan to stem the constriction in the credit market.

Had the redemption requests remained on the books, it would have resulted in a crash of the commercial paper market and would have forced a near industry-wide halt in money market fund redemptions.


  1. And now, of course, they claim that money markets will also be insured (for a limited time). If money markets were so safe, why do they now need to be insured? Why do people all have to keep their funds in them?

    Okay, so you still want to pull your money out of the money market. The question is - where are you now going to put your "money" --- obviously, paying bills is a good idea, also (perhaps) buying hard money like gold and silver (not going to make you rich, but a Krugerrand could buy a trucker a tank of gas, perhaps), or (as a last resort) one could put the money into a savings account, insured by FDIC.

  2. I asked my Ferris Baker Watts broker in August of 2007 if Preserve Fund would break the buck. He thought my question was idiotic. After I mentioned to him that the fund had money invested in Countrywide, Yankee Bonds (failing European Banks, etc.), he quipped "Do you want your money in lower yielding Treasuries? He implied that Ferris would back the fund and sent me a Ferris' balance sheet. This was before a rogue trader took out 1/3 their capital. Now Ferris is being bought by a Canadian bank - it has not yet happened. I am mad that I listened to and believed any stockbroker. It goes on to verify my professional experience as a bank examiner that Wall Street is run by crooks,liars and/or morons.

  3. No American MSM has disclosed that the Asian markets collapsed in the middle of the night- during Asian trading day. The trading was halted around 1pm their time as Hang Seng steadily dropped by over 1300 points until it was then stopped. THAT is why the Fed intervened.

    China acknowledged the calamity by condemning American use of "financial WMDs"- (also unreported in any US press). Or EU for that matter, as the Fed dove in and 'fixed' it all in time for the Masters of the Universe to wake up to a Heng Seng off by only -4! All manipulation.