OK, here’s what happened that precipitated these events.
A couple of money market funds “broke the buck” — owing to the collapse of Lehman Bros. The funds had been playing rather fast and loose with their credit quality standards, and the NAV of funds that held 10’s of billions in $$$ fell to a few cents below $1.00.
OK, so what was the big deal? With what was happening in that timeframe, no one knew anything for certain any more. Money market funds are “supposed to bore the investor into a good night’s sleep...” — and suddenly, this assumption was put to lie.
Suddenly, no one trusted ANYTHING any more. When money market funds can’t return your capital whole.... it is time to get out of “cash equivalents” and into real cash, or sovereign debt (which is as close to cash as one can get without having Brinks trucks show up at your front door...)
The result was this run on money market funds, which resulted in huge spreads on investment-grade short-term commercial paper as the funds sold out as well as the huge buying surge into T-bills (culminating in their eventual negative yields a couple weeks later).
Are you sure you should be posting facts on this topic? LOL!
Nice Post! What everyone seems to forget, is EVERY Wire Transfer on earth is recorded through the SWIFT #. I do wire transfers for my business monthly. There can be no easier way to find where that money went on 9/15/08, than by tracking the SWIFT #. I humbly propose anyone that says otherwise is lying. You can’t just remove Billions of Dollars from anywhere w/out leaving a TRAIL. Period. Of Course, you’d have to trust the democratic controlled congress to investigate this occurrence, which will never be pursued.Some young reporter somewhere in the USA, who wants to make a name for themselves, should do some digging!
You are right. My husband and I had sold our IRAs investments into money markets in January 08. I became very unsettled with what was going on with the underlying MM investments i.e. commercial paper, SIVs etc. Thursday, September 18th I called Vanguard/Fidelity and had them send all of the cash from the money markets and mail us a check to deposit in our bank in a rollover. I didn’t know at that time; the next morning the Pres. was going to announce that all money markets were guaranteed. This announcement is what finally stopped the blood letting from the money markets. NOw we are stuck at a bank for 1 year as I didn’t do custodial transfer. If I withdraw the funds and take possession due to a bank run all of our retirement will be subject to penalties and taxes. However, at the time I felt I was doing the prudent thing.