Financial woes spread to money market funds for the first time during this financial crisis. A $62 billion money market fund Primary Fund from Reserve on Tuesday saw its holdings fall below its total deposits, a condition known as “breaking the buck” that hasn’t happened to a money market fund since 1994. Money market funds are supposed to be conservatively invested and almost as safe as cash. Combined with a stock market loss of 450 points, something is clearly wrong.
What about the government’s balance sheet? How long can bailouts go on? The Treasury Department, for the first time in its history, said it would begin selling bonds for the Federal Reserve in an effort to help the central bank deal with its unprecedented borrowing needs. (Treasury officials said the action did not mean that the Fed was running short of cash, but simply was a way for the government to better manage its financing needs.)
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