The Treasury Department is seeking authority to temporarily backstop money markets amid intense strains in financial markets as part of a broader fiscal package
WASHINGTON—The Treasury Department is seeking authority from Congress to temporarily backstop money markets amid intense strains in the financial sector—as part of a broader fiscal package to bolster the economy due to the coronavirus pandemic.
In a memo outlining the administration’s proposal, The Treasury Department said it is asking lawmakers to temporarily suspend restrictions on its Exchange Stabilization Fund so it can develop guarantee programs for the money-market mutual fund industry. Money-market funds are investments designed to be a safe place to park cash temporarily with little risk of taking a loss.
The program would last until the White House terminates the national state of emergency President Trump declared on March 13, 2020, according to the memo viewed by The Wall Street Journal. In 2008, the Treasury intervened to guarantee money-market funds after the collapse of Lehman Brothers spooked investors, who pulled out more than $200 billion from the funds over two days. The U.S. backstop calmed investors, who generally consider money-market funds as safe as cash, but an uproar over Wall Street bailouts led Congress in 2010 to prohibit Treasury from issuing such guarantees in the future.Copyright ©2019 Dow Jones & Company, Inc. All Rights Reserved.
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