A New Type of Run on Banks?

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A New Type of Run on Banks?

Richard Warren
Real Estate Investor · Las Vegas, NV · Member since 2008 · 1k+ posts · 447 votes

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


:cool:

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  • Account Closed
    Manhattan, NY · Member since 2008 · 801 posts · 61 votes
    18y

    This has a lot people in and out of the industry worried.

    0Reply
  • Account Closed
    Tucson, AZ · Member since 2008 · 945 posts · 45 votes
    18y

    Does that mean that the money I have in money market accounts is NOT insured? If that is so, I should move it into standard savings accounts, right?
    Ofgift

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  • Richard Warren
    OP
    Real Estate Investor · Las Vegas, NV · Member since 2008 · 1k+ posts · 447 votes
    18y

    If you are at a bank it is insured by FDIC. It is money market mutual funds that are not insured.

    :cool:

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  • Account Closed
    Manhattan, NY · Member since 2008 · 801 posts · 61 votes
    18y

    As Richard said, the ones at banks are insured but they aren't really money market accounts, they are hybrids.

    True money market accounts are not insured, that is one reason why the rates are higher.

    However, the fund managers use conservative investment vehicles so as to not "break the buck" or end up with a share price less than $1.

    There is talk of a new entity being created to provide insurance for money market accounts like demand deposit accounts.

    Personally, I am not draining my money market accounts. But, I have mine with very stable institutions.

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  • Account Closed
    Tucson, AZ · Member since 2008 · 945 posts · 45 votes
    18y

    It's at Bank of America --deposit account, money market savings. It's insured, right?

    0Reply
  • Account Closed
    Manhattan, NY · Member since 2008 · 801 posts · 61 votes
    18y

    Insured

    0Reply
  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    18y

    Up to the FDIC limits. I'd dang sure not have any money in a bank over the insurance limits.

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  • Account Closed
    Tucson, AZ · Member since 2008 · 945 posts · 45 votes
    18y

    What is there now is not anywhere near the insurance limits, but that brings up a question:
    When my rental sells, it will be via a 1031. Since the agent will be holding MY money until used, in an account in my name, I believe, do I need to be sure the funds are not in BOA, and since the money will be over the insured limit, that it be split and kept in 2 separate banks?
    thanks
    ofgift

    0Reply
  • Jason Alexander
    Residential Real Estate Broker · Member since 2008 · 9 posts · 0 votes
    18y

    sell everything! the market is tanking

    0Reply
  • Gus S
    Real Estate Investor · Los Angeles, CA · Member since 2008 · 8 posts · 0 votes
    18y

    The treasury guarantee plan for money market mutual funds guarantees any funds deposited prior to Sep 19th. Unlike FDIC insurance there is no limit on the amount covered. However this guarantee is expected only to last for one year.

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