Extraordinary events are piling up on Wall Street so fast, it's hard to know where to focus. Forgetting the prospective bailout of AIG for a moment, since every media outlet is on that one, the most shocking development of the day for me is news that a $60 billion money market fund "broke the buck" on Monday due to losses in Lehman Brothers paper that it held. So much for the safety of "cash".
The Reserve Primary Money Fund (RPFXX) has become the first money-market fund in more than a decade to lose money because its board was forced to write down $785 million worth of LEH debt to zero. The fund has reportedly seen assets plunge by 60% to $23 billion in the past two days after holders got wind of the fact that it would have to cut its net asset value to less than its usual $1 per share.
[9/25/08] Help is on the way for some money market investors: TD Ameritrade says it's going to put up $50 billion to make sure its brokerage customers who have money in the Reserve Primary Fund suffer no losses. A drop in the fund's net asset value last week left investors with less than $1 for every dollar invested. Meanwhile, Ameriprise Financial says it'll backstop losses with up to $33 million. The firms said those amounts represent the cost of making up the 3 cents per share their customers stand to lose (the fund's net asset value dropped to 97 cents a share last week).
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