The Treasury’s guarantee program for money market funds was allowed to expire today. The government insurance of investor assets in money market mutual funds was first established in September 2008 for a three-month period and later extended through September 18 of this year. The program was implemented shortly after the failure of Lehman Brothers when a large money market fund, the Reserve Primary Fund, announced that its net asset value had fallen below $1 per share, or broke the buck.
The Treasury has suffered no losses under the program and earned approximately $1.2 billion in participation fees. Money market funds that signed up for the guarantee were required to pay up-front fees of between 1 and 1.5 basis points.
“As the risk of catastrophic failure of the financial system has receded, the need for some of the emergency programs put in place during the most acute phase of the crisis has receded as well," says Treasury Secretary Tim Geithner in a statement. "The Guarantee Program for Money Market Funds served its purpose of adding stability to the money market mutual fund industry during market disruptions last fall and ultimately delivered a healthy return to taxpayers."
The money market fund guarantee would have been triggered if a participating fund's net asset value fell below $0.995 per share.