<p>Today I received a letter from Vanguard with the following:
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<p>Keep in mind that FDIC does offer insurance to cover money invested in the money market funds as of September 12, 2008.</p>
<p>So is this a ploy to phase out the FDIC insurance since it’s new money market account? Any thoughts?</p>
<p>Money markets were never insured by the FDIC.</p>
<p>Looks to me like Vanguard wants to keep new money to a minimum, because if they have to go out and buy more short term treasuries it will hurt the overall yield of the fund; thereby, reducing the return for existing shareholders.</p>
<p>BC,
It never was until this banking crisis.</p>
<p>[Some</a> Money Market Funds are Insured - Consumerism Commentary, personal finance since 2003](<a href=“http://www.consumerismcommentary.com/2009/03/08/some-money-market-funds-are-insured/]Some”>http://www.consumerismcommentary.com/2009/03/08/some-money-market-funds-are-insured/)</p>
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<p>dstark, the fund is yielding .53% and .25%. How much more do we have to go lower?</p>
<p>0%…</p>
<p>In 2003-05, 3 month Treasury Bills were near 1%. Guess what investment firms, banks, governments, individuals and firms, place their idle money?</p>
<p>[Bloomberg.com:</a> Government Bonds](<a href=“http://www.bloomberg.com/markets/rates/index.html]Bloomberg.com:”>http://www.bloomberg.com/markets/rates/index.html)</p>
<p>3-Month 0.000 06/11/2009 0.18 / .19 0 / -.000 03/13
6-Month 0.000 09/10/2009 0.4 / .41 0 / -.000 03/13
12-Month 0.000 03/11/2010 0.65 / .66 0 / -.000 03/13
2-Year 0.875 02/28/2011 99-27 / .96 0-00 / .000 03/13
3-Year 1.375 03/15/2012 100-01½ / 1.36 0-00 / -.000 03/13
5-Year 1.875 02/28/2014 100-01½ / 1.86 0-00 / -.000 03/13
10-Year 2.750 02/15/2019 98-25½ / 2.89 0-00 / .000 03/13
30-Year 3.500 02/15/2039 96-28 / 3.67 0-00 / .000 03/13 </p>
<p>Inflation Indexed Treasury
COUPON MATURITY
DATE CURRENT
PRICE/YIELD PRICE/YIELD
CHANGE TIME
5-Year 0.625 04/15/2013 97-20 / 1.22 0-00 / .000 03/13
10-Year 2.125 01/15/2019 102-22 / 1.82 0-00 / -.000 03/13
20-Year 2.500 01/15/2029 101-28 / 2.38 0-00 / -.000 03/13
30-Year 3.375 04/15/2032 121-14 / 2.19 0-00 / -.000 03/13</p>
<p>Columbia_Student… you just love to argue with me. I know what I am talking about when I talk about the markets. I know as much as Jim Cramer. With what he says on tv…more ;)</p>
<p>The op refers to money market account with Vanguard, a mutual fund company. How about “money market” account with a bank, for eg. Citi ? The Citi brochure said their “money market” account is FDIC insured. It yields about 2.1%. </p>
<p>I am confused by the names and lack faith in the financial institutions now. :(</p>
<p>I hope we’re not going to get negative interest rate like Japan in the 90’s.</p>
<p>[Japanese</a> banks hit with negative interest rates - Nov. 6, 1998](<a href=“http://money.cnn.com/1998/11/06/economy/japan_bank/]Japanese”>Japanese banks hit with negative interest rates - Nov. 6, 1998)</p>
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<p>yes I do. haha. But seriously where am I disagreeing with you?</p>
<p>I guess not post #3. :)</p>
<p>I never thought I would see the day where people would take their money and put it in the mattress.</p>
<p>We got close.</p>
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<p>They are called the same thing, but they are fundamentally different. A MM with a Bank should be FDIC insured. Just make sure they are selling you a bank deposit, and not a MM Mutual Fund that is managed by the Bank. Not likely, but I wouldn’t put it past some less honest banks.</p>
<p>C Student
Some money market funds are insured by the Treasury, not the FDIC. The FDIC insures bank accounts. Here’s what Vanguard says about the insurance:</p>
<p>"An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although a money market fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in such a fund. Notwithstanding the preceding statements, Vanguard money market funds are participating in the U.S. Treasury’s Temporary Guarantee Program for money market funds. The program generally does not guarantee any new investments in a fund made after September 19, 2008, and is scheduled to expire on April 30, 2009. For more information, please see the funds’ most recent prospectus as supplemented on December 2, 2008.</p>
<p>U.S. government backing of Treasury securities applies only to the underlying securities and does not prevent share-price fluctuations."</p>
<p>In my view, the Treasury will probably extend the insurance past the end of next month if financial markets remain fragile, because the failure of another large money market fund to keep their $1.00 value would be highly disruptive to the markets.</p>
<p>^Thanks for the explanation, dadx3.</p>
<p>I got the same letter from Vanguard regarding my Treasury Money Market account. If the interest rates on Treasuries gets too low, the expenses of running the fund are more than the interest income received. Then you’ll break the buck and companies would rather die than do that.</p>
<p>I’ve quit putting new money into the fund. I haven’t taken the old money out.</p>
<p>What does SIPC insure? SEC website indicates that SIPC insures for MM accounts.</p>
<p>SPIC only insures a loss from a brokerage itself going under, not the underlying securities. </p>
<p>For the life of me I can’t understand why anyone would have $ in that Vanguard fund when there are money FDIC insured money market accounts at 2% such as Emigrant Direct.</p>
<p>So we have a “hold” from ellemenope and a “sell” from Iron Maiden. My mattress is lumpy enough as it is so that’s not an alternative.<br>
dstark, what would you do if you had significant assets in the Vangaurd fund?</p>
<p>That all depends on what you plan to do with the money longer-term. If it is going to be cash for a very long time as a cash cushion, rainy day fund, or a diluter of your other investments, it’s probably better off in CDs or money-market deposit accounts. </p>
<p>Keep in mind there are negative of the money-market deposit accounts- high fees if your balance falls below some set amount and limitations on transactions - money market mutual funds have no such negatives, but some like Treasury ones have tiny yields.</p>
<p>My substantial cash balance is kept in municipal money market funds, which pay somewhat better than Treasury money market funds but keep flexibility for future investment options.</p>
<p>Not true, there are many money market deposit accounts that are FDIC insured paying 2% - Emigrant Direct and ING are two that come to mind immediately. No minimum deposit.</p>