Shareholders Sue Reserve Primary Fund

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HOW CAN I GET MY NAME ON THE LAWSUIT?

PAT GANGITANO of NY 7:16PM October 05, 2008

First and as an aside, I read an article saying The Reserve spokeswoman said the distribution on 10/14 would be between 32 and 38%.
Also, a recent WSJ article points out that the question is whether the liquidation of the Primary Fund is done quickly and at a higher loss, or slowly and rationally in order to maximize the recovery. The WSJ article (dated 10/2) states:
"However, the fund is now in a difficult position with its remaining $32 billion in assets. A lot of that is tied up in bank commercial paper. Prices for such debt have been declining in recent weeks, and yields have soared.
The Primary fund holds $400 million in commercial paper from Bank of America Corp., paying 2.56% when it matures this month. Meanwhile, some one-month Bank of America debt was trading closer to 4% Wednesday, according to one trader. The fund also has $66 million in floating-rate notes from Merrill Lynch & Co., maturing in January at 2.89%, while some Merrill paper with January maturity is trading closer to 5%. The Primary fund also still holds debt tied to Goldman Sachs Group Inc., Wells Fargo & Co. and Wachovia Corp. It also holds debt tied to Barclays PLC, HSBC Holdings PLC, Royal Bank of Scotland Group PLC and UBS AG.
It is tempting to wait to cash out, because all the debt is highly rated. But some of the holdings mature as late as October 2009, and it is unclear when the market for such debt could return to normal."
This is the first mention I've seen of what the latest maturity dates on Reserve assets are, but I can see that being true and I'm settling in for a long wait. I'd rather get all or nearly all of my money back in a year than see a firesale where I stand to lose much more. With the 10/14 distribution, hopefully other people stuck in this Reserve mess will get a little breathing room and be able to settle in for a wait, too.
Judging by recent news, it looks like only $10 billion of the $40 billion in attempted redemptions on 9/15 and 16 left the Primary Fund. The remaining $30 billion is being pooled with everyone else and those people are getting pro rata redemptions the same as everyone else. This is good news and would, without any other factors, lessen the originally projected $.03 loss to closer to $.014, IMHO.

TC of TX 10:41AM October 03, 2008

Go to the ther.com site. 32% of the dollar is coming back on October 13. The remainder is coming later...as soon as the security devices become mature. I don't like it either, but other boards are bringing logic and remaining calm. The commerical paper seems to be highly rated. No one wants to buy now, so waiting its probably best for all us. Most people think that the Primary fund will return significant amounts back (I'm guessing better than 90% assuming no big defaults...some say .97 or better). The total losses will be spread amoung $50 billion instead of $20 billion.
Here what others are saying
Most of the reporting on this subject has been outrageously irresponsible, seemingly intent upon fanning the flames of hysteria for the purpose of inducing panic. Here's a more responsible view:
The Reserve announced that it will soon distribute cash equal to 32% of its fund's holdings. This does NOT mean that 100%-32%=68% was lost. It means they have sold 32% of the fund's holdings and are distributing the cash proceeds. They will continue selling the holdings and distribute more cash proceeds later. In case anybody hasn't noticed, the credit markets are illiquid. The Reserve will sell as conditions permit. Otherwise, it makes sense for them to wait, even if that means waiting until the holdings mature. Remember, this is a money market with an average maturity of about 50 days -- probably closer to 40 days by now. (Granted, that's an average, not a "finish line.")
The fund's shareholders are trapped, and it is difficult and scary, but they are trapped in top-rated short-term debt. It's kind of like buying a bond and then seeing yields rise. You're "trapped" until maturity, unless you want to take a loss. The difference is that maturity for these holdings is as short as it gets.
Also keep in mind that the Reserve is selling the holdings and distributing the proceeds under the supervision of the SEC and a federal district court judge. Evidently those authorities approve of -- perhaps even insist upon -- the measured approach the Reserve is taking.
There will be a loss. About one percent of the holdings (the part in Lehman) went bad. Some redemptions were processed before the SEC and the court got involved, but it seems that not all of those front-running redemptions were processed. Comments to various websites indicate that at least some trades were reversed. Perhaps the SEC is behind that. Even if the whole $40B got out and left the $20B to soak up the Lehman loss, that would magnify the 1% loss to 3%. More likely, a fraction of the $40B got out. The Reserve and the SEC say that all redemption requests that were not processed will receive equal distribution. So the actual loss from the Lehman event should be somewhere between 1% and 3% (not including the contribution from Ameritrade, Ameriprise or any other firm that has chosen to preserve customers against loss).
I really wish reporters would grasp this situation and present the information in a manner that didn't fan the flames of hysteria.

encinitas, ca of CA 6:25PM October 02, 2008

Well, here it is October 2, 2008 and no Reserve Fund monenies have been "returned". I'm out $90,000. Yes, Virginia - that is a big piece of my "life-savings". Does anyone know how to contact the firm that filed this suit? None of these article offer much info either. Is this a conspiracy of silence? Me thinks so. The lack of information is appalling!

Starduster of VA 4:57PM October 02, 2008

How can I find out more information about the law suite?

Gary of 7:42PM October 01, 2008

My broker (FBW) assured me that this was as safe as cash now my funds are frozen and the broker can tell me very little.

Don of MD 5:49PM October 01, 2008

I have nearly 600k that I cannot get access to. I called TD Ameritrade and their Apex customer service rep told me "at least you'll have a story to tell your grand kids". I'm not kidding. They will get burned in this mess hopefully.

jarl of OH 5:19PM October 01, 2008

I'm another sad sack with RYPQX as the only cash source I have (had) outside of a little money in the bank. I'm scrambling to sell a stock or two (bad timing) to create some cash. I'm glad to have found this site so I could finally see that I am not alone. I feel like a very small fish. And, I, too, was sold on it as a very safe place to put my money. Only disadvantage I was told, is that it would take an extra day to get my cash (vs. money market) since I'd have to sell shares.

Robin of VA 8:34PM September 30, 2008

And here I was under the impression that the almost 40 million dollars that left the fund did so one day prior to breaking the buck. Which then couldn't be a result of breaking the buck unless they had non public knowledge. Which would have been illegal...

concerned retail investor of OR 11:16AM September 30, 2008

As a retired federal emplooyee I put my complete trust in Ameriprise; besides a few stoks held in my accoount, I maintained several thousand dollars in what I was led to believe was a safe place, the Reseerve Primary Fund. The money from the ocassional trades that I made were swept into what I realize was not the safest place to be. What is most painful is that every two weeks my wifes's payroll went into that account as well. I wrote checks to pay my mortgage, insurance, and other living expenses. Now with the funds frozen I don'd know what I will do. I have lost comlete faith in our financial systems!!

hector r alvarez of VA 11:06AM September 29, 2008