Money funds to get $540b in Fed financing
WASHINGTON - The Federal Reserve has now come to the aid of money market funds as the government seeks to break the credit logjam that threatens the global economy.
A week after the government announced it would spend $250 billion to buy stakes in US banks, the Fed moved yesterday to help money market funds that have been squeezed by worried investors demanding to cash out their holdings.
The Fed said it would provide up to $540 billion in financing to money market mutual funds in a new program called the Money Market Investor Funding Facility.
"If these money markets are not working properly, then the economy is significantly threatened because this is where businesses get their short-term financing for their day-to-day operations," said Mark Zandi, chief economist at Moody's Economy.com.
JPMorgan Chase & Co. was chosen to run five special funds that will buy from money market mutual funds certificates of deposit, bank notes, and commercial paper, which is short-term debt companies issue to raise money for payroll or supplies.
Also yesterday, the Treasury Department said it had selected two major accounting firms to help manage the government's $700 billion rescue program.
Ernst & Young will receive $492,000 to provide accounting services, and Pricewaterhouse Coopers will get $191,500 to set up internal controls for the program that will focus on buying distressed real estate assets from banks to encourage lending. 