Business

Treasury’s Secretive $2.4 Trillion Mutual Fund Guarantee

[Author’s note: the following is a cross post that originally appeared on CNBC.com]:

Treasurys Secretive $2.4 Trillion Mutual Fund GuaranteeDetails about a secretive government program to bail out money-market mutual funds are finally coming to light.

Acting without any explicit Congressional authority, the U.S. Treasury guaranteed in excess of $2.4 trillion of money market funds after the giant Reserve Primary Fund “broke the buck” following the bankruptcy of Lehman Brothers. The program, which ended on Sept. 18, 2009, seems to have successfully prevented a panicked run by money-market fund investors.

But until now, the Treasury has kept the identities of the funds that received government backing and the amounts guaranteed secret. It was not clear how many funds obtained backing or for how much taxpayers were on the hook during the program’s duration.

Linus Wilson, an assistant professor of finance at the University of Louisiana at Lafayette, recently obtained data about the program from the Treasury, through a Freedom of Information Act request.

The data from the Treasury show that taxpayers were backing in excess of $2.4 trillion through the mutual fund program. Hundreds of funds participated in the program, amounting to almost 99 percent of the total money-market mutual fund assets.

Mutual fund companies such as BlackRock, BNY Mellon, T. Rowe Price, Dreyfus and Legg Mason took advantage of federal assistance. Banks that provide money market funds to customers — including JPMorgan Chase, Goldman Sachs, Morgan Stanley and Wells Fargo— also participated.

Despite the enormous size of the guarantees, the Treasury collected only $1.2 billion in fees from the participating funds. By Wilson’s calculation, most participating funds paid just 0.04 percent, or 4 basis points, for a year’s worth of insurance.

Treasury used $50 billion from an account set aside for exchange rate stabilization to fund the program. Those funds can be spent at the Treasury Secretary’s discretion—even when it takes a pretty creative logical leap to connect the expenditures to exchange rates.

“Clearly, the tie between exchange rates and money-market mutual funds is very weak,” Wilson points out. “Moreover, it is not clear that $50 billion was enough to guarantee over $2 trillion in assets.”

Guaranteeing the money-market funds was not without risk. Although money-market funds have rarely seen their values drop below a dollar, guaranteeing the funds, it could be argued, encouraged moral hazard as investors lost the incentive to police the quality of fund management.

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© 2012 CNBC.com, John Carney

Comments (59)

1 2
  • joecaff2
    Posted on August 9, 2012 at 4:56pm

    Part 2 of 2…
    Romney issues an executive order to fire everyone hired under Obama starting with his corrupt Czars and moving all the way down to the folks who sweep the capitol floors. Next, Romney issues an executive order that calls for a 25% reduction in ALL government budgets and expenditures, followed by an order that assures ALL remaining government employees begin working a full 40 hour work week and contribute at least 25% toward their own healthcare and 50% toward their own retirement program. Step three total elimination of Obamacare! Next, all government departments immediately layoff 15% of their workforce and private auditing firms begin the task of finding and eliminating what I have no-doubt will prove to be 50% overspending and old fashion corruption throughout the system. The final phase is President Romney begin the task of outsourcing much of the Federal Governments operations to savvy entrepreneurs who will eagerly accept the chance to build an efficient private sector enterprise to manage the tasks previously run by the Fed and it’s bloated payroll.
    This will slow the hemorrhaging of taxpayer cash, create new private sector companies ready to hire skilled workers who understand the definition of productivity and profit and put America back on firm ground to pay down our debt and deficit. The only thing left to do after we get back on track is to stop the nonsense of the left and begin the process of restoring truth, honor and America’s greatness!

    Report Post »  
    • ALL4FREEDOM
      Posted on August 9, 2012 at 6:28pm

      YES! But don’t forget the smackdown of bureacratic regulations and the unleashing of the coal, oil, and gas industries. Once we become net exporters of energy, the vast amounts of treasure flowing to the middle east (much of it ours) will flow here. Then we’ll really begin to attack the debt. When the debt is down (gone!) what is paid in interest can be put to use here. Balanced budgets! The brilliant 9-9-9 plan and the return to sound money! IT CAN BE DONE!

      Report Post »  
    • kcinco
      Posted on August 9, 2012 at 8:21pm

      Right on! I feel a revolution comin’ on !! Romney just needs to pick Rubio for his running mate, or we could be screwed once again.

      Report Post » kcinco  
    • Wayner
      Posted on August 10, 2012 at 12:36am

      Why not just be realistic instead of all this fantansy Plan 1 and Plan2… If Obama is re-elected we’re done for as a country anyway… If Romney wins… The Fed and the big banks (one and the same) will still run things so 4 or 8 years later… we’ll still see business in Washington and Wall St. as usual.

      Report Post »  
  • joecaff2
    Posted on August 9, 2012 at 4:55pm

    Part 1 of 2…
    Many replying to the latest unethical “loans”; “insurance” or “to-big-to-fail” bailout given to 99% of the mutual funds are correct when they say the American Taxpayer is being robbed. Not only are they stealing from us and future unborn taxpayers they are doing so as they tell us “All is well” or as Obama likes to say “the economy is doing fine, we have pulled back from the edge of the cliff”. This is total nonsense! Our country is in trouble and we have what will prove to be the most unlawful, unethical, deceitful President and Administration that we have ever experienced in our history. However, although most American’s know more about who is winning on American Idol or what the stats are in the best NBA, NFL, NL, AL and NHL teams than what is going on in Washington DC or at their State Government there is hope to turn things around. We start by removing as many of the corrupt Senators and Congress people throughout the Federal and State Governments. We kick Obama to the curb in November and five minutes after Mitt Romney finishes his oath of office the real work begins….

    Part 2 is somewhere…

    Report Post »  
  • mastice
    Posted on August 9, 2012 at 4:21pm

    Here we go again…. didn’t learn the last time did we? (or ‘they’ didn’t learn)

    Report Post » mastice  
  • zoro51
    Posted on August 9, 2012 at 3:23pm

    AUDIT THE FED FIRE INEPT n PONZI pesronal remove them NOW jail them take thier property bank accounts. stealing from the usa IS A CRIME PERIOD… fire his ass now

    Report Post » zoro51  
    • dublinthewagons
      Posted on August 9, 2012 at 5:44pm

      Be careful what u wish 4. When the FED is audited thousands will commit suicide. Thousands imprisoned. The dollar will be worth less in weight than toilet tissue. Riots and murder in the streets and the nation will fall. Hell will look like an obama vacation.

      Report Post »  
  • TRILO
    Posted on August 9, 2012 at 2:22pm

    The American taxpayer is doomed. Our country is so far gone I do not see how it can be taken back. The taxpayer is the sugar daddy to 100+ million government “subsidized” individuals, not including federal/state employees. ONE OUT OF THREE PEOPLE RECEIVE TAXPAYER WELFARE!!! WHERE IS THE OUTRAGE? There are too many voters on the government dole to ever change a damn thing. Wall street and banks have zero risk, only gain. The taxpayer funded TARP, failed stimulus, failed loans to energy companies, nation building, Euro swaps, the federal reserve gives secret loans to foreign countries all the while devaluing our money, the taxpayer is now backstopping 100+ Trillion in derivatives contracts for the TBTF trading clearing houses and now we hear about this!!!

    Our great, great, great, great, great grandchildren will still be indentured servants to this out of control government for the spending we are doing today. Yet the nation is still talking about the Chick-Fil-A non- controversy – controversy. Distract the sheeple with circuses so they do not realize that their country has been stolen right out from under their noses. Works every time.

    Hate to say it but no presidential candidate, congressman or senator will solve this mess as the quicksand is up to our chin. We are witnessing the fall of the once great USA.

    http://www.washingtonsblog.com/2012/05/as-an-encore-to-bailing-out-the-big-banks-government-to-backstop-derivativees-clearinghouses-in-the-u-s-and-abroad

    Report Post » TRILO  
  • SH4D0W
    Posted on August 9, 2012 at 1:39pm

    (Ya..What he said)

    Lotus503
    Posted on August 9, 2012 at 12:14pm

    “The government is and has been stealing the value of our currency for many years by printing more and more dollars, with little or no regard for the impact it has on everyone and everything in this country. The prices we pay for everything are not going up…the spending power of our money is going down…and has been since 1913.

    And they have the nerve to ask us to pay more taxes!

    When will the citizens of this country wake up to this fact and do something about it?”

    Report Post » SH4D0W  
    • The_Jerk
      Posted on August 9, 2012 at 2:02pm

      The Shylock’s have been at this forever. Christ tried to get them out of the temple.

      Report Post »  
  • lukerw
    Posted on August 9, 2012 at 1:06pm

    They can only Execute you Once… regardless of the Number of your Treasons! So, after the first… the Obama Crew skate!

    Report Post » lukerw  
    • historyguy48
      Posted on August 9, 2012 at 1:17pm

      Well, that’s not really true. Have you ever heard of “drawn and quartered” it was the English penalty for treason. Frankly, its the worst part of the movie “Braveheart”.

      Report Post » historyguy48  
    • 000degrees
      Posted on August 9, 2012 at 1:21pm

      Be nice if SOMEBODY was keeping an eye on things in dc…..

      Report Post »  
    • lukerw
      Posted on August 9, 2012 at 1:53pm

      @HISTORY…
      The Japanese had… a slow Execution by Slow Boiling… where screams could be heard for 6-8 Hours!

      Rule: Never be Captured!

      Report Post » lukerw  
    • docvet
      Posted on August 9, 2012 at 3:01pm

      This may only be a myth, but I have heard of “The death of a thousand cuts” where a bowl of stones with a thousand parts of the body are listed and each day a stone was drawn and that part of the body was removed without anesthesia. If you had enough money or were lucky, a fatal part was “drawn” early, e.g., heart, brain, etc. There are times and certain people who, in my opinion, could be high on the eligability list for this.

      Report Post »  
    • Silversmith
      Posted on August 9, 2012 at 8:50pm

      Why is no one DOING ANYTHING about this.

      (boy am I tired of saying that)

      Silversmith

      Report Post » Silversmith  
    • docgreen
      Posted on August 10, 2012 at 1:30am

      @txdave22
      Hey all, if you see txdave22 posting, can you ask him how long before the Markets Collapse when shady charecters like Geitner are stealing money? OMG, this is Crazy! txdave seemed to lay all the Blame on Bush. I gave him an ear full, starting with the 9/11, then Katrina, the IMF, the housing crash, then the Lehman brothers, and various other Financial Businesses, at that point I was fuming, I told him he needs to go back to school and get a refund, since the Liberal Left must have brainwashed him! I told him he needs to go to the bank and learn about CRA, and then make sure he asks the bank about what kiting is! I then explained to him that obama bailed out GM and asked him if he realized that GM turned around and sent money to banks in Europe. At the same time I asked him about the IMF and who funds it “we do throught taxes” and the US is the Biggest doner. I explained that the markets are suspended on the dollar, and the more we print, the more the value goes down. I explained 40 to 60 cents on every dollar goes to China and interest. I moved on and told him that each person in the US would have to pay 60,000 dollars to pay off the debt, and thats without the new health care bill. From there we moved on to the Billions were losing per quarter with the USPS, Amtrack and thats just the start. We have the stimulas and haven’t even talked about the FED! I read this story and I know the Bible is right! In one hour the worlds riches come to nothing!

      Report Post »  
  • caleejr
    Posted on August 9, 2012 at 12:52pm

    When it collapses – it will go down in history as making the Great Depression look like prosperous times by comparison

    Report Post » caleejr  
  • progressiveslayer
    Posted on August 9, 2012 at 12:43pm

    Trillions rolls off the tongues of modern day politicians so easily and I wonder how long they can play the shell game? 2.4 trillion is peanuts when you look at the big picture.

    http://www.moneynews.com/StreetTalk/Kotlikoff-US-debt-trillion/2011/09/01/id/409412

    Report Post » progressiveslayer  
  • watersRpeople
    Posted on August 9, 2012 at 12:41pm

    You know – Now it’s the “Empire Strikes Back.”

    Report Post »  
    • watersRpeople
      Posted on August 9, 2012 at 12:51pm

      Except that the Empire is good.

      Report Post »  
    • watersRpeople
      Posted on August 9, 2012 at 12:55pm

      Like I said, Atheists are my strength.

      Report Post »  
    • watersRpeople
      Posted on August 9, 2012 at 1:01pm

      You got up to speed with technology, and now your spirits won’t die, when Interstellar Battleships come to earth.

       
    • normalmom
      Posted on August 9, 2012 at 1:29pm

      Watersrpeople your comments are funny, I think you may have interesting water at your house.

      Report Post »  
    • Anonymous T. Irrelevant
      Posted on August 9, 2012 at 2:26pm

      Tim, why do you keep changing your username? Is it because you have a tendency to post a statement, then answer it repeatedly? You expose yourself this way. I picked up on it with your last username change, then recognized your new one last week, because you could not stop this strange obsession you have of talking to yourself. Don’t be surprised when The Blaze kicks you off again.

      Report Post » Anonymous T. Irrelevant  
  • watersRpeople
    Posted on August 9, 2012 at 12:37pm

    Obi Wan feels my presence.

    Report Post »  
  • IMCHRISTIAN
    Posted on August 9, 2012 at 12:32pm

    The devil made him do it and will be there to great him someday. Sure glad when all that auditing of the Feds come forth.

    Report Post »  
  • watersRpeople
    Posted on August 9, 2012 at 12:23pm

    Obi Wan Kenobi. Yes, you, you know who I’m talking about.

    Report Post »  
    • watersRpeople
      Posted on August 9, 2012 at 12:33pm

      You people know Star Wars is real don’t you, only it’s the opposite. Because the earth is upside down in relation to the universe.

      Report Post »  
  • thibx
    Posted on August 9, 2012 at 12:21pm

    they pay only 4 thousand a month for getmo, they need to fill it up starting with oboma or execute them all like china does.

    Report Post »  
  • JUSTANOTHEROPINION
    Posted on August 9, 2012 at 12:19pm

    Everything takes time to discover when it comes to what the government does and that is what the President has been counting on. His hopes were/are that by the time we actually find out what he and his administration has been doing it will be too late and he will have been re-elected. I just hope that those with the abillity to discover will kick it into high gear. The American people need to find out what this administration has been doing in secrecy before it is too late. The President promised he would change the way Washington did business and he has kept his word, Washington has went from mostly corrupt to completely corrupt. ANYBODY BUT OBAMA 2012!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

    Report Post »  
  • Lotus503
    Posted on August 9, 2012 at 12:14pm

    The government is and has been stealing the value of our currency for many years by printing more and more dollars, with little or no regard for the impact it has on everyone and everything in this country. The prices we pay for everything are not going up…the spending power of our money is going down…and has been since 1913.

    And they have the nerve to ask us to pay more taxes!

    When will the citizens of this country wake up to this fact and do something about it?

    Report Post »  
  • watersRpeople
    Posted on August 9, 2012 at 12:12pm

    The earth is the wood of the world, and you can build your Ark out of worm-wood (which I don’t recommend), or you can build it with gopher wood in that pitching it within and without with light.

    Report Post »  
  • NOBALONEY
    Posted on August 9, 2012 at 12:10pm

    The Fed’s quantative easings, libor manipulations, UK & China’s plans to stimulate their economies. Treasury was, and is in this “House of Cards” global fiat money game that will come crashing down on us all.

    Report Post » NOBALONEY  
    • taxpro4u03
      Posted on August 9, 2012 at 2:38pm

      Hm — 1913 — Corp usa bankrupt… WWI–> re-draw the ‘gerrymandered’ world — Install League of Nations (fail) wipe the ‘debt’ slate clean… 1933—> Corp usa and several other ‘allied countries’ bankrupt. (Geneva Conventions of 1930-32) – Banking Holiday declared via executive order by FDR — (THIS guy was APPOINTED FOUR TIMES) — origin of most of the ‘current’ requirements for birth certificates, marriage LICENSES (and a plethora of other ‘licenses’ to ‘exercise a privilege’ – taxes for damn near everything we see today originated on HIS watch) — WWII –> re:gerrymandered world; Creation of the UN; ‘dollar’ is the world‘s ’reserve’ currency — debt slates wiped clean….. “History doesn’t repeat itself but it seems to rhyme.’ Mark Twain

      Report Post »  
  • watersRpeople
    Posted on August 9, 2012 at 12:10pm

    Like I said the earth is the wood of the world, where we all meet face to face. You know like the title of that movie ‘Face-off“ or ”Face to Face.”

    Report Post »  
  • MLeonova
    Posted on August 9, 2012 at 12:07pm

    I have the same question as Randy, who will do the jail time for this and WHO will be RESPONSIBLE for paying back the US Citizens for this secretive “not so transparent” program? When do the citizens who work hard to support these guys lifestyles’ and foolish spending methods get a bail-out?

    Report Post » MLeonova  
    • randy
      Posted on August 9, 2012 at 12:39pm

      So let’s do the math boys and girls..
      2.4 trillion divided by the US population of 312 million = 7692.30769231
      SO, our government has stolen roughly $7700 form each and every one of us?

      Missing 9 Trillion Dollars from the Federal Reserve:
      http://www.youtube.com/watch?v=GYNVNhB-m0o

      Missding 2.3 million from the Pentagon:
      http://www.youtube.com/watch?v=3kpWqdPMjmo

      Does anyone feel the US is a powder keg with the line of gunpowder heading to it, already ignited and rushing towards an explosion?

      God forbid, but does it feel like a civil war is headed our way?

      Report Post » randy  
    • normalmom
      Posted on August 9, 2012 at 1:20pm

      Alot of us have those same questions, well at least those that do think for themselves and not be lemmings following Obama off the cliff. Randy I also see that a civil war may be on the way. If Obama wins it may be fight or accept to lose everything that this nation was founded on. Pray he doesn’t win again and that someone better than Romney goes for it next election.

      Report Post »  
  • hauschild
    Posted on August 9, 2012 at 12:05pm

    2.4 Trillion? That’s chump change to leftists – especially considering they‘re the types that aren’t involved in earning it.

    Report Post »  
  • justangry
    Posted on August 9, 2012 at 12:01pm

    If Congress controls the purse, why aren’t they shutting down the out of control executive branch? The only possible conclussion I can come up with is they’re in kahoots.

    Report Post » justangry  
    • Mutiny
      Posted on August 9, 2012 at 3:32pm

      LOL, yep and Ron Paul is the crazy one for saying it. We are all screwed and our children are going to really suffer for it.

      Report Post » Mutiny  
  • Thors Hammer
    Posted on August 9, 2012 at 11:55am

    Washington (either side of the aisle) plays fast and loose with taxpayers $$, and always have; but it’s worse now than ever, and getting worse each year. The entire system needs a dismantling and fumigating – top to bottom – and it’s a good thing Gitmo is still available because several hundred of the worst offenders should be enjoying a life-time vacation there. Our forefathers knew this could happen and tried to put safeguards in place, but those safeguards have been trampled on and ignored for so long that I don’t know how any city, state, or federal prosecutor can keep a straight face while bringing charges against these amateur ‘con-men’ that have no idea that the ones prosecuting them are likely 1,000 times worse! Time to put a permanent stop to it. IMHO

    Report Post »  
  • Detroit paperboy
    Posted on August 9, 2012 at 11:51am

    Will someone please explain to me why we even have a congress ???? Why are we paying them ???

    Report Post »  
    • IMCHRISTIAN
      Posted on August 9, 2012 at 11:59am

      Why keep the President in as he is doing so many unlawful things without congresses approval. The rest of us would probably do jail time if we pulled some of the things he has done. Vote him out in Nov

      Report Post »  
    • speeddiva
      Posted on August 10, 2012 at 1:34am

      So they can rename Post Offices.

      Report Post »  
  • randy
    Posted on August 9, 2012 at 11:50am

    So that’s where the 2 Trillion went…
    My only question is, who’s going to do the jail time?

    Report Post » randy  
    • justangry
      Posted on August 9, 2012 at 12:02pm

      Jail time? That’s reserved for anyone that sells a nickel bag of weed.

      Report Post » justangry  
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