"Fed in Talks With Money Market Funds to Help Drain $1 Trillion" writes BusinessWeek. The article says, "The Federal Reserve is in talks with money-market mutual funds on agreements to help drain as much as $1 trillion from the financial system as policy makers prepare for the first interest-rate increase since June 2006, according to a person familiar with the discussions. The central bank is looking to the $3.2 trillion money-market mutual-fund industry because the 18 so-called primary dealers that trade directly with the Fed have a capacity limited to about $100 billion, estimates Joseph Abate, a money-market strategist at Barclays Capital in New York. Money-market funds may welcome the opportunity to trade with the Fed after the financial crisis reduced the supply of safe assets in which they can invest." The piece quotes Deborah Cunningham, chief investment officer at Federated Investors, "There are lots of great credit stories, but the option of going with the Fed and the government -- it takes away part of the risk." BusinessWeek adds, "Conversations with the Fed 'seem pretty positive,' she said, adding that the Fed and the industry should be in a position to conduct operations before the end of the year."

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