A New Type of Run on Banks?
Money market funds, while uninsured, have always been deemed to be safe. The funds sought to maintain a $1 share price and only invested in the safest short-term instruments available. Yet Putnam Funds just closed a $12 billion Money Market Fund due to redemptions by major institutional investors. The fund has absolutely no exposure to the assets that experiencing turmoil yet the fund closed due to fears of a panic. The redemptions caused the shares to fall below the $1 mark.
Could the money market funds be the next wave of investor panic?
See article: http://news.yahoo.com/s/ap/20080918/ap_on_bi_st_ma_re/wall_street
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