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Thanks for everyone's comments. My concerns stem from my ignorance
about the money sector. Given all the "bubble fallout" in equities in
the form of corporate governance and accounting, I just
wonder what the banks have been doing in the last 5 or so years.
TF> The Funkhousers wrote:
>> Uninvested funds in your account are generally held by a brokerage
>> firm in their name, albeit in your account, UNLESS you have instructed
>> them to do otherwise.
>>
>> MOST brokerages will credit interest on these balances, although they
>> are not required to do so, and the terms of these credits are solely
>> within their discretion. If you have really substantial balances
>> these rates are negotiable. If the brokerage failed those balances
>> would be subject to the SIPC coverage and any additional insurance
>> that the brokerage had purchased to protect customer balances.
>>
>> SOME brokerages will optionally offer "sweep" facilities that
>> automatically transfer uninvested balances into one or more money
>> market mutual funds. The frequency of "sweeps" and the minimum
>> amounts required are determined by the brokerage as part of
>> operational policy. In order for a money fund to be used you must
>> have signed an application for the fund and you must be furnished both
>> a prospectus for the fund and its most recent periodic reports. If a
>> fund has been purchased with uninvested funds it will be shown as an
>> investment position in your monthly statement as a investment
>> position.
>>
>> All money funds are registered and as such full disclosure of all
>> investment policies, objectives and expenses are provided via the
>> prospectus. The worth and/or assets of a money fund are NOT covered
>> by either SIPC of private insurance. Contrary to popular belief, more
>> than one money fund has lost enough value so that the stated
>> investment goal of maintaining a stable value of $1.00 per share
>> failed. In all of the cases of which I am aware the investment
>> advisor or distributor has voluntarily made a contribution of capital
>> so as to preserve the $1.00 value.
>>
>> For those who believe that the Fed and or the federal government can
>> bail us all out in the case of a panic I would suggest the they read
>> Secretary of the Treasury William Simon's "A Time For Truth." The
>> commercial paper market almost collapsed some time ago and fortunately
>> the events which led to the panic occurred after the markets closed.
>> By morning every Federal Reserve Bank had been told to make whatever
>> loans their commercial customers needed the next day, regardless of
>> terms -- the Fed would buy them. That quieted the markets the next
>> morning but if it had not the inflation that would have followed would
>> have caused our system to fail completely -- how about a dollar worth
>> one cent.
>>
>> With the leverage in the system today who knows how many other
>> countries would be pulled into the same vortex.
>>
>> Richard Funkhouser
>>
>> _Craig wrote:
>>
>>> When I ask my brokers about money market funds, I get less than
>>> satisfying answers. I ask them when I exit a position, where does
>>> my money go? Where do they park my money? They say I get credit
>>> earning interest in a money market fund. When I ask more specific
>>> questions about this money market fund, they essentially say, "it's
>>> just a money market fund."
>>
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