Warning!! Another wild and wooly weekend ahead!!!

The Feds have announced plans for more intervention in the credit markets to prevent more chaos and disruption to the markets. President Bush authorized the Treasury dept to use $50 Billion from the exchange stabilization fund to guarantee money market mutual funds. These funds have been hurt by high redemption rates recently. The straw that broke the camel's back was when Putnam Investments Primary Fund was hammered by high redemptions to the point where the funds shares dipped below the $1.00 share price to $0.97. Since money market funds inception in 1970, this has been only the second "breaking the buck" incident. According to imoneynet, $169 billion was redeemed from money market mutual funds from Sept. 10 to Sept. 17. That decreased the funds total assets almost 5% in one week!! On sept 17 total money market mutual fund assets were around $3.4 trillion. Once again the phrase "too big to fail" occurred.
Good news for the taxpayers is the transfer of these redemptions to more liquid and more stable debts, mainly government debt. In effect, the redemptions are given to the government & the government uses the funds to keep the redemptions from destabilizing the money market funds. Talk about working miracles in strange ways!!!
The Treasury Dept and the Federal Reserve Board announced plans to work with Congress throughout the weekend to set up a comprehensive plan to buy out the "toxic debt" that is plaguing the credit markets. When I review the results of the government's work on market stabilization the last two weekends, Monday should prove very interesting.

P. S. The Exchange Stabilization fund was started back in the 1930s to provide emergency funds to help stabilize the US Dollar.