The Associated Press writes "Moody's: Crisis left money fund industry reeling", which says, "At least three dozen money-market mutual funds were at risk of failing during the financial crisis, besides one that did end up collapsing, Moody's Investors Service said Tuesday. The report shows how shaky the nearly $3 trillion money-fund industry was after Lehman Brothers' September 2008 collapse. Around the time that a soured Lehman investment triggered the demise of the $64 billion Reserve Primary Fund, Moody's says at least 36 other U.S. money funds were also at risk of 'breaking the buck' -- failing to ensure clients could get back at least a dollar for each dollar they put in." The AP piece, written by Mark Jewell, adds, "A researcher with another firm tracking the money-fund industry, Peter Crane of Crane Data, said the $12.1 billion in pretax expenses cited by Moody's as having been spent to prop up funds far overstates the long-term costs. Many fund companies that tried to shield clients from losses by purchasing failed portfolio investments ended up selling those holdings later, sometimes without big losses, Crane noted. Money from those sales could eventually absorb some of the upfront costs to prop up a fund. Crane said fund companies typically have systems in place to quickly rescue a fund if one investment in its portfolio sours, and the value of the fund's assets is in danger of sinking below the $1-per-share safety benchmark. So it's unlikely many of the 36 funds that Moody's cited would have ultimately broken the buck, he said." "It was bad, but this makes it seem a lot worse than it really was," the AP quotes Crane, publisher of the newsletter Money Fund Intelligence.
