On Friday, the U.S. Treasury announced a 1-year program that would insure the holdings of any publicly offered eligible money market mutual fund. The American Bankers Association quickly issued a statement indicating deep concern that the plan might undermine the banking system because money market funds pay higher rates and had no investment limits under the Treasury's plan. On Sunday, the Treasury released a statement clarifying that the guarantee would only apply to amounts already invested in money market funds as of the close of business on Sept. 19. By limiting this new guarantee to funds that existed on or before last Friday, they have eliminated the incentive for people to move money out of bank accounts to seek a higher government guarantee," ABA said yesterday in a statement.
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