MoneyRates on MM Accounts
Website MoneyRates.com recently posted the piece, "Do money market accounts have FDIC insurance coverage?" It asks, "Q: Are money market accounts insured by the FDIC? A: That depends on what you mean by "money market accounts." It is important to distinguish between money market savings and money market funds when determining FDIC insurance coverage." On "Money market savings accounts vs. money market funds," the basics article says, "The two names are very similar: money market deposit accounts, and money market funds. They are both liquid assets offering similar (generally relatively low) interest rates. However, for all the similarities, there is a critical difference. Money market savings accounts held at participating FDIC-insured institutions are covered. Money market funds, on the other hand, are a form of mutual fund and as such they are not covered by FDIC insurance.... This lack of insurance for money market funds does more than open up the possibility of losses in those investments. A couple years ago the U.S. Security and Exchange Commission adopted reforms (inspired by the 2008 financial crisis) that could restrict the liquidity of money market funds." MoneyRates explains, "For one thing, the SEC changed accounting rules for money market funds so that their market values can now vary. Therefore, if a fund is trading below what you paid for it, you cannot count on getting all of your original value back when you need it. Also, to prevent runs on money market funds in times of financial stress, the SEC also now allows fund companies to restrict withdrawals under certain circumstances, or impose a fee for those withdrawals. Either of these could impact the availability of your money. So, generally speaking, both money market deposit accounts and money market funds provide stability and liquidity. However, if you want absolute stability and liquidity, you should look at money market deposit accounts."
