Saturday's Wall Street Journal writes "A Glimpse at Reserve's 'Buck' Race", which recaps the "top managers' desperate, chaotic and ultimately ill-fated attempt to keep the $1 price and save its flagship Primary Fund from collapse." The information behind the Journal story was revealed earlier this week in a lawsuit filed by the Secretary of the Commonwealth of Massachusetts William Galvin. See the original release, "Secretary Galvin Charges Reserve Management With Fraud," which includes a 43-page Complaint and 55 pages of Exhibits.

The Journal says, "Just hours after Lehman Brothers fell, billions of dollars in redemption requests were pouring into the $62 billion Reserve Primary Fund, which held Lehman debt. The storied money-market fund was in danger of seeing its share price fall below the sacrosanct $1 level, an event that would further undermine investor confidence. So Bruce Bent II, senior vice president of the fund's management company, placed an urgent call for help to Timothy F. Geithner, president of the Federal Reserve Bank of New York. Mr. Bent didn't get past a receptionist."

It continues, "The company sought help from the Fed and the Securities and Exchange Commission. It even tried the Investment Company Institute, the mutual-fund industry's leading trade group. In the end, the problems proved overwhelming: the large holding of debt from Lehman and a flood of calls from investors to redeem their Primary Fund shares. Now the company faces a bevy of civil suits from investors, actions against it by Massachusetts and Colorado, and a potential SEC enforcement action. Investors have been returned a portion of their money, but are awaiting the rest, and it isn't clear how much they will get back."

The article and Massachusetts complaint contain a detailed description of actions by Reserve Management and by Reserve Primary's Board of Directors and a timeline of events between the Lehman bankruptcy filing and the second-in-history "breaking of the buck". The WSJ story finishes, "At 3:45 p.m. word came that the Fed had declined to help. Reserve Management said it had exhausted all its options to support the Primary Fund.... The trustees announced that the Lehman paper was worthless and the Primary Fund had broken the buck."

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