Speculation is that THIS is the real motivator behind the Fed bailout super SIV fund !
(snip)" Legg Mason, SEI Investments Co. and SunTrust Banks Inc. have stepped in to make sure their funds don't fall below the $1 a share net asset value, known as ``breaking the buck.'' The 10 largest managers of U.S. money funds have about $50 billion in short term debt of SIVs, some of which has defaulted.
``This is the first real case'' of securities held by money-market funds defaulting, said Peter Crane, founder of Crane Data LLC, the Westborough, Massachusetts-based publisher of the Money Fund Intelligence Newsletter.
Legg Mason invested $100 million in one of its money funds and arranged $238 million in credit for two others, the Baltimore-based company said in a Nov. 9 regulatory filing. SunTrust Banks Inc. received approval from regulators last month to protect two money funds that bought debt from Cheyne Finance Plc if the SIV is unable to repay the Atlanta-based bank.
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Money funds, considered among the safest investments, loaded up on asset-backed commercial paper with the hope of increasing returns. Asset-backed commercial paper maturing in 90 days yielded an average 5.3 percent this year, 0.6 percentage point more than U.S. Treasuries with similar maturities, data compiled by Bloomberg show.
``When you get involved in this contest for when you can make 3 basis points more here or 2 basis points more there, that's insane,'' said Bruce Bent, chairman of Reserve Funds, who in 1970 created the first money-market fund. ``It's not what I designed the money fund to do.''
Now, managers including Charlotte, North Carolina-based Bank of America, Federated Investors Inc. and Fidelity Investments are trying to limit losses by backing a plan coordinated by the Treasury Department for an $80 billion fund to keep SIVs afloat.
``It could be the impetus behind Treasury in this whole process,'' said William O'Donnell, head of U.S. rate strategy at UBS Securities LLC in Stamford, Connecticut. ``They're not talking about it. They don't want to say, `We're doing this to save the money funds.'''
Raising Questions
The SIV crisis has raised questions about whether the debt vehicles are appropriate investments for money-market funds. Vanguard Group, the fifth-largest U.S. manager of money funds, shunned them as too risky. New York-based Goldman Sachs Group Inc., the world's most profitable securities firm, dumped SIV debt on expectations the vehicles would be hurt by losses on subprime-mortgage securities.
``I'm sure, in hindsight, every manager wishes they hadn't'' bought SIV debt, said Robert Plaze, an associate director in the investment management division at the U.S. Securities and Exchange Commission in Washington. "(snip)



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