MarketWatch's "The Day the Buck Broke"
MarketWatch's "The Day the Buck Broke" subtitled, "Lehman's collapse almost brought down the money-market industry," says, "As the threat of a Lehman Brothers bankruptcy grew last September, many money-market fund managers were wary but not worried. Their industry had quietly grown over the past generation to become a major rival to the banking system, with $3.5 trillion in assets. It had weathered crises such as the collapse of Baring Plc, the Asian currency mess ... and the fall of hedge fund giant Long-Term Capital Management. Though some managers were talking to their boards and their staff, there wasn't a feeling of impending disaster. But all that changed in the late afternoon of Sept. 16, the day after Lehman actually went down. Reserve Primary Fund -- the oldest and fifth-largest fund in the business -- said it had about $785 million in Lehman debt that was now worthless and as a result it would price its shares at 97 cents." They quote Peter Crane, "Countless other money-market funds were poised to break the buck.... The mini-run would have spread to all funds." The article adds, "Despite the reform efforts, some say that last year's events may simply have to be seen as a once-in-a-lifetime event." "`The SEC may be able to prevent one or two dominos from falling, but nothing could have prevented the complex series of events that led to what happened [last September]," said Crane. See also, `Bloomberg's article on Reserve, "Sleep-At-Night-Money Lost in Lehman Lesson Missing $63 Billion".
