Money Market Fund Guarantee Program Now Over

Money Market Funds

In response to the collapse of Lehman Brothers last year, and the resultant fall of the net asset value of money market funds below $1, which is called breaking-the-buck, the Treasury Department put into place a temporary Money Market Fund Guarantee Program to help stabilize the money market funds in the country. Today that guarantee program will expire as planned.

The Money Market Fund Guarantee Program was put into place as investors in the money market mutual funds rushed to remove their capital from the funds, after the unusual experience of losing money on them. The temporary guarantee calmed things down, once it was understood their money wouldn't lose any of its value.

A money market fund is a mutual fund which invests primarily in short-term, high yielding US government bonds, commercial paper, and other short-term debt instruments. Very rarely has the net asset value of money market mutual funds fallen below $1, but it has happened, and while they aren't backed by the FDIC, overall they've been considered a very safe investment since they were instituted in 1970.

Money Market Funds