Word: fdic
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...there's a catch: taxpayers are already on the hook for the failures of financial institutions, and it's possible that the bill will actually be larger without bailout legislation than with it. That's because the regulators who mind the financial industry - the Federal Reserve, Treasury and FDIC - will keep doing what they've been doing: stepping in to prevent the chaotic failure of banks and other large financial institutions. This means continuing to put hundreds of billions of taxpayer dollars at risk, but in a way that adheres to no clear plan of action and doesn't require...
...them out of existence or shut them down - whereas it had to make things up as it went along with investment banks Bear Stearns and Lehman Brothers and insurer AIG. That's why the demise of giant banks Washington Mutual and Wachovia, arranged over the past week by the FDIC, occurred in a far more orderly fashion than the non-bank meltdowns...
...orderly isn't the same as cheap. To get Citigroup to absorb Wachovia, the FDIC agreed to share the risk on a $312 billion portfolio of loans (Citi has to eat the first $42 billion in potential losses; anything above that hits the FDIC fund...
...market funds are designed to be low risk, and by law are allowed to invest only in government bonds, certificates of deposit, short-term IOUs issued by companies, and other highly liquid securities - though, unlike the similarly named "money market deposit accounts" found at many banks, they're not FDIC-insured...
...Will more companies have to step in and prop up the value of their money market funds? Probably. Will more funds break the buck? Maybe. But short of having all your money in FDIC-insured bank accounts, which most likely carry lower yields, there aren't that many options that are safer...