Money Market Funds

Federated Investors Inc. bailed out a so-called enhanced cash fund for wealthy investors and institutions after declines in the market value of mortgage-backed securities the fund held. But Federated, the third-largest manager of money market mutual funds, said it hadn't propped up any of its money-market portfolios. Some Federated rivals have recently had to pump in millions of dollars to bail out ailing money funds.

The U.S. economy appears to be caught in a cycle of recurrent panic attacks. So many things have gone wrong, and so much anxiety has accumulated in the financial system, that nothing seems safe. As a result, no sooner has one crisis seemed to recede than another has popped up, to be followed by another and still another. "We've gotten to that classic point in a financial crisis where it's gone on for long enough we know there are losses. We just don't know where they are," said Joseph R.

'Better safe than sorry" has been the motto of many an investor over the last year. One of the biggest beneficiaries of that cautious mind-set has been the money market mutual fund industry. This week, assets in money funds crossed the $3.5-trillion mark for the first time, according to Money Fund Report in Westborough, Mass. Investors added a net $22.4 billion in the seven days that ended Tuesday, lifting total assets to a record $3.52 trillion, according to the newsletter.

Money market mutual fund companies scrambled Wednesday to calm their clients' fears after the pioneer of the asset class "broke the buck," falling below the industry standard $1 per share in value. Companies including Fidelity Investments, Charles Schwab Corp. and Vanguard Group posted online alerts noting that their funds had little or no exposure to troubled financial firms such as Lehman Bros. Holdings Inc.

Investors with their nest eggs stashed in many money market mutual funds will soon have a U.S. government safety net akin to what bank depositors have long enjoyed. Moving to halt a broad run on the funds, the U.S. Treasury on Friday offered as much as $50 billion in insurance coverage to protect the beleaguered, cash-like investments. The government said that for the next year it would insure the holdings of any retail or institutional fund that pays a fee to participate in the program.

Early Thursday, Treasury Secretary Henry M. Paulson sipped Diet Coke in his office as four flat-screen computer monitors flashed the latest financial data from around the world. For months, Paulson had been running from crisis to crisis, engineering rescues for disintegrating firms. Now a cataclysm was enveloping global markets, triggering a run on money market funds that had been considered safe. Paulson decided the U.S. government must intervene, and fast. Federal Reserve Chairman Ben S.

The Federal Reserve's cut in its benchmark interest rate Wednesday could put more money in your pocket -- or take some out. Or both. Figuring out how you're affected may be more complicated than usual. Here are questions and answers: Will I earn less on my bank savings? If you have money in interest-earning bank accounts or certificates of deposit, you can expect to be "as disappointed as Cubs fans," said Greg McBride of Bankrate.com in North Palm Beach, Fla.

The Federal Reserve's stay-the-course plan for short-term interest rates will let many savers breathe easy: The yields they're earning on money market funds and other short-term accounts are likely to hold near current levels, which are close to six-year highs. "I think interest rate stability is here to stay for a while," said Greg McBride, an analyst at Bankrate.com in New York. The average seven-day annualized yield on money market mutual funds was 4.

With U.S. bond yields rising and money market rates holding steady, some investors are pouring cash into bond and money-market mutual funds, data show: * Purchases of bond fund shares totaled $3.2 billion the first two days of this week, more than double the $1.4 billion that went into U.S. stock funds in the period, according to TrimTabs Investment Research, a Santa Rosa, Calif.-based firm that tracks market trends. * Cash inflows to money market funds totaled $39.

Wall Street's deepening worries about who owes whom in the credit markets now are touching one of investors' most trusted places to keep cash: money market mutual funds. The $2.7-trillion money fund business was thrown on the defensive Wednesday on fears that some corporate and financial-company issuers of short-term IOUs could have trouble making good on their debts. Money funds are big investors in those IOUs, such as so-called commercial paper.