Posted on Fri, Sep. 19, 2008
last updated: November 24, 2010 01:49:37 PM
WASHINGTON — The Bush administration capped the workweek Friday with additional unprecedented steps designed to stave off a potential Wall Street collapse that would have dramatic ramifications across the globe.
After the announcement Thursday night that it would work with Congress to create a mechanism for getting toxic loans off bank and financial firms' balance sheets, the Bush administration announced more measures to help investors and the troubled housing market.
Money-market mutual funds are considered among the safest of investments, and many pension funds, which invest largely on behalf of ordinary Americans, are active in these markets. However, a big player in this market was unable to meet requests for redemptions Wednesday, and regulators feared the equivalent of a bank run on money-market funds.
So Treasury tapped a fund created in 1934 to bolster the U.S. dollar amid the Great Depression. This temporary effort will work like federal insurance on bank deposits, but will protect previously uninsured investments in money markets instead.
"This action, which would not be necessary in a well-functioning market, is temporary in nature and part of the comprehensive set of steps being taken by the Federal Reserve, the Treasury and the Congress," SEC Chairman Christopher Cox said in a statement Friday.
The SEC's move came a day after the Financial Services Authority, the United Kingdom's market regulator, banned short selling of financial stocks through January.
These actions capped a week that included the unprecedented $85 billion loan from the Federal Reserve to insurance giant American International Group on Tuesday night, a day after investment bank Lehman Brothers filed for bankruptcy and rival Merrill Lynch sold itself to Bank of America to avoid a similar fate.
ON THE WEB
MORE FROM MCCLATCHY
McClatchy Newspapers 2008