TITLE I - Authorizing the Treasury Department to Buy Mortgage-Related Assets
Sec. 10. Maintaining insurance parity. (4 Comments)
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REIMBURSEMENT.The Secretary shall reimburse the Exchange Stabilization Fund established under section 5302 of title 31, United States Code, for any funds used for the temporary guaranty program for the United States money market mutual fund industry during the period when the Exchange Stabilization Fund was used as the source for the guarantee.
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LIMITATION ON USE OF FUND.The Secretary is prohibited from using the Exchange Stabilization Fund for the establishment of any guaranty programs for the United States money market mutual fund industry.
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MONEY MARKET FUND AUTHORITY.
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IN GENERAL.The Secretary is authorized to establish an insurance or guarantee program for money market mutual funds in connection with the program authorized by this Act.
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APPLICABILITY.The authority of this subsection shall remain in effect
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for 120 days following the date of enactment of this Act; or
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such longer period, not to exceed 365 days after the date of enactment of this Act, as the Secretary certifies in writing to Congress is necessary to continue the insurance or guarantee program for money market mutual funds.
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LIMITATION ON INSURED AMOUNTS.
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DEPOSIT INSURANCE MODEL.Any action by the Secretary or a program to provide guarantees or insurance to the money market mutual fund industry shall not provide insurance in excess of the amount of insurance provided to any depositor under the Federal Deposit Insurance Act (12 U.S.C. 1811et seq.).
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PREMIUMS.In exchange for providing such a guarantee or insurance, the Secretary shall charge premiums to those money market funds which receive the insurance. The rate charged by the Secretary shall be equivalent to the rate charged by the Corporation to deposit insurance providers, respectively, for such insurance.
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CONSULTATIONS.In carrying out the duties of the Secretary under this section, the Secretary shall consult with the Board of Directors of the Corporation and the Securities and Exchange Commission.
4 comments on Sec. 10. Maintaining insurance parity.
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the bill (Section 10) allows for insurance of money market funds but doesn't appear to require that if they fail anyway, they be taken over by the FDIC. This needs to be a bedrock principle, if you blow up your business, the government gets it, you don't get to keep it when in a free market you'd be bankrupt.
posted by Ian Welsh, Firedoglake (www.firedoglake.com) at September 22, 2008
Funds being insured also need to pay premiums and a board needs to be set up which can ensure that those funds being insured are adhering to good practices (don't insure people who are gambling.) -
Ian Welsh-
posted by Mithras Invicti, blog Fables of the Reconstruction at September 23, 2008
Elsewhere in the bill, it does provide for premiums and insurance limits using FDIC as a model.
I'm not sure what good it would do to take over a money market mutual fund that has failed. First of all, it's not an asset that would do the Treasury any financial good. Second, money market funds are investments in commercial paper, which is not issued by the fund. If that commercial paper defaults, it's (probably) not the fund's fault. -
FDIC insurance limits should be indexed to inflation. $100k isn't what it used to be!
posted by Mark Mecum at September 26, 2008 -
The Secretary has way too much power. How are you going to control and limit the Secretary's perchance to abuse his or her position. The public knows that kickbacks and free rides are the way of life in Washington DC, especially with our Congress.
posted by Craig Bryant, Citizen at September 28, 2008
We don't trust you!