Thanks for the comments. Bugs, I agree it would be a big PITA if the fund dries up.
That helps to better define my question: What are the chances of the money market account becoming insolvent? Has this happened in the past?
I would think it is a different company division than the subprime loans but I do not know enough to really understand my risk in this account. I opened the account because I assumed the money market deposits were basically risk-free.
Better double-check it indeed has a guarantee; the Vanguard money market mutual funds have the disclaimer: “A money market mutual fund investment is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although a money market mutual fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in such a fund.”
GMAC owns Homecomings Financial, the number 4 subprime in the nation.
They closed the San Diego subprime servicing site and layed off 400 employees in Jan.
They have delayed their earnings report–hmmm, wonder why?
GMAC finalized the sale of 51% stake in the company to hedge-fund Cerebus in Dec. of 06.
Yesterday, they announced (internally) the firing of Dave Applegate, President of Residential Finance Group (RFG), and Chief Operating Officer of GMAC ResCap, and Eric Scholtz, head of ResCap Capital markets.
So, they have HUGE exposure, big layoffs, and are firing their COO and head of Capital Markets, to be replaced by head managers of the hedge fund that bought them. You make the call…..
I double checked the FDIC insurance and the text is very clear for my account: I am insured and below the limit.
I appreciate the comments from everyone.
I still have the question: Has anything like this happened in past? If they file for bankruptcy, is the effect on my account the immediate inability to access funds?
They will not file for bankruptcy. They are way too big–I mean, 49% of it is still owned by GM. They will downsize and prune away, but still have a lot of capital to play with. If all you are worried about it is GMAC going out of business, then you are completely safe.
Also, GMAC mortgage is the prime unit, and while ResCap is integreting all their businesses, they still separate their prime paper from the subprime when it comes to loss serverity.
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