If you pay any attention to the stock market you know that yesterday, September 15, 2009, was the one year anniversary of the Lehman Brothers bankruptcy. It marked the beginning of the absolute free fall of the financial markets that took place over the ensuing 6 months, so it was indeed an important anniversary.
However, there is another one year anniversary today that no one has been talking about. It was one year ago today, September 16, 2008, that The Reserve's Primary Fund, a money market mutual fund, "broke the buck." The reason it broke the buck was it held some Lehman Brothers notes and paper which instantly became worthless. This caused the asset value of the fund to drop below the sacred $1.00 threshold. This was a HUGE event and it caused banks, businesses and individuals to rethink the security, safety and liquidity of all money market mutual funds, but no one is talking about it.
The Reserve was the pioneer in the money market mutual fund industry. Their breaking the buck is the equivalent of the Surgeon General of the United States admitting he has taken up smoking. The breaking of the buck was only the beginning of the troubles at The Reserve. Within a few days they froze all assets in all of their money market mutual funds, even ones that had no exposure to the toxic Lehman Brothers debt. I know this because I had one of The Reserve's other funds, the US Government Money Market Fund, in my IRA, Roth IRA and brokerage account. In an instant, the majority of my cash reserves was suddenly frozen, illiquid and inaccessible.
One year later the Reserve Primary Fund still has not returned all it's money to shareholders. This is an absolutely unacceptable outcome after 12 months have passed. The only thing more unacceptable than that is that there has been no new regulation of the financial services industry over the past 12 months. Nothing, nada, zilch.
Mood: Perplexed
Failed Advertising Slogan of the Day:
West Virginia: Lame and Annoying
Song Of The Day:
"Happy Anniversary baby! I've got you on my mind."
-Happy Anniversary
The Little River Band
Wednesday, September 16, 2009
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