They Broke The Buck On Money Market Accounts

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NAV = $0.97

I heard this briefly today. I don't know if this is only for Lehman MMAs. Money Market money is invested in short term Treasurys for the most part. The fall out from Lehman is that they broke the buck on Money Market Accounts. These accounts are not guarnteed by any Federal or State Agency.

This means a $1 in is now worth $0.97.

There was a point in the mid 90's when they came close to breaking the buck, but were able to continue to give that guarntee.

Same is true of the 100K rule in FSLIC and FDIC in 1990, they decidedd to honor the more than 100K in an account in an institution that had failed. This time around I would not be so sure. The problems dwarf what has happened before.

[jyl]

The buck break was in a formerly $62BN money market fund that apparently was used by institutional investors and held $800MM of LEH debt that it has now marked down to zero.

Investors started pulling money out of the fund, yanked 60% out between Sunday and today per some reports. Presumably the investors were watching the fund's assets, saw the LEH exposure, and fled. The fund manager is not a big shop, so lacked sufficient assets to make up the difference.

I confess I've checked my money market funds' holdings, and didn't find any LEH (or AIG for that matter) holdings.