On Friday, the Treasury Department announced a $50-billion program to stabilize the nation's money market mutual funds, which traditionally have been among the safest investments available to individuals and institutions but had begun to show cracks as the financial crisis deepened.
Treasury staffers briefing reporters on background said Washington was offering to insure funds containing $2 trillion of investment -- or about as much again as the government insures in bank deposits -- to stanch a run on the funds as investors sought still safer places for their money.
Officials said funds would have to pay a fee for the insurance and that the program was envisioned to last only one year. They said that, unlike federal insurance for bank deposits, which covers up to $100,000, the money market insurance would cover unlimited amounts.
"Concerns about the net asset value of money market funds falling . . . have exacerbated global financial market turmoil and caused severe liquidity strains," the Treasury Department said.
Separately, the Securities and Exchange Commission issued an emergency order barring traders from "selling short" the shares of 799 financial stocks for at least 30 days.
Short selling is the practice of borrowing shares of a company and then selling them in hopes that their value will fall. When that happens, short sellers buy the shares back at a lower price to repay the loan, reaping a profit.
Financial companies loaded with bad debt had become prime targets for short sellers and the SEC said it had become concerned that the practice "may be causing sudden and excessive fluctuations of the prices of such securities in such a manner so as to threaten fair and orderly markets."
Also Friday, the Fed took another step away from its traditional mission of looking after the nation's banks by announcing that it would engage in new lending and purchases aimed at propping up the value of asset-backed commercial paper and the short-term debt of such entities as mortgage giants Fannie Mae and Freddie Mac. Both are widely owned by money market mutual funds.
Fed officials said the program could involve up to $300 billion in additional lending and purchases.
Much of Washington spent Friday trying to coax out tidbits about what the new "bad assets" plan would look like from lawmakers and administration officials.
