WASHINGTON (AP) - The Treasury Department on Thursday said it is prepared to buy assets from a troubled money market mutual fund, part of an effort to prevent any disruptions to already fragile financial markets.
The department has agreed to be a buyer of last resort to assist in the liquidation of the Reserve Fund's U.S. Government Fund due to "unique and extraordinary circumstances."
Under the arrangement, the fund has 45 days to find buyers for its assets. After that, the Treasury will step in and buy any remaining shares to ensure that each shareholder receives $1 for every share they own.
The money to buy the shares will come from a temporary money market fund guarantee program, set up earlier this year, and bankrolled by Treasury's Exchange Stabilization Fund. The exchange fund was created in 1934 to provide support for the dollar.
Treasury said it does not anticipate taking similar action for any other mutual funds. The department called its action on Thursday a response to a "unique situation."
The Reserve Fund's U.S. Government Fund was permitted to suspend share redemptions as of Sept. 17 under an order issued by the Securities and Exchange Commission, the department said.
No other funds participating in Treasury's temporary guarantee program received a similar order, the department said. "Because of this, Treasury does not foresee a need to take similar actions with regard to any other funds participating in Treasury's temporary guarantee program."
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