The Treasury Buying Failed Money Market Fund's Assets

The Treasury announced today that it will buy up to $5.6 billion in securities from The Reserve Fund's U.S. Government Fund as the fund liquidates.

Basically, the Treasury is performing a limited TARP action, buying the troubled, illiquid assets held by The Reserve Fund above market levels to ensure that each money market customer receives $1 for each share. The fund had sought to liquidate itself by selling assets into the market but market values are so low this would lead to huge losses for investors.

The money, of course, isn’t coming from the $750 billion bailout. Whatever’s left of that is for Obama’s Secretary of Hope to figure out how it should be spent. These funds will come from the Exchange Stabilization Fund, which is what the Treasury has been using to guarantee money market mutual funds since September.