Fed Pledges $600B to Keep Money-Market Funds Afloat
Will partner with JPMorgan, lend money to help cover redemptions
By Kevin Spak,  Newser Staff
Posted Oct 21, 2008 11:17 AM CDT
Federal Reserve Chairman Ben Bernanke testifies on Capitol Hill yesterday.   (AP Photo)
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(Newser) – The Federal Reserve today unveiled a $600 billion program to finance the purchase of assets from money-market mutual funds, Bloomberg reports. JPMorgan will oversee five special units, which will use money borrowed from the Fed to buy CDs, bank notes, and commercial paper nearing maturity. The program is the Fed’s attempt at loosening the commercial paper market.

Money-market funds are struggling to keep up as clients cash out of the volatile market, with the collapse of Lehman Brothers prompting investors to yank $133 billion from funds over the next two days. “In terms of the redemptions money-market funds are seeing, and hedge funds as well, any of these moves by the Fed are going to help,” said one fund founder.