Money Market Account Safety Question?

[Jim Jones]

I have a question for all of you and I know you may be able to be of some assistance.

I currently have about 80% of my savings in a Money Market Savings Account with a large credit union. The amount is substantial and would be devistating if I was to loose any portion of the money due to the current troubles in the market (I like others am saving for a deposit for when the times it right). When I read the banks satement on the accounts “Safety and Soundness Guarantee” it says the following.

Safety and Soundness Guarantee

The National Credit Union Administration (NCUA), a U.S. Government Agency, insures your savings up to $100,000 and the funds in your IRA up to $250,000.

Your savings and IRA Accounts (including trust accounts) earn free Life Savings Insurance of $100–$2,000 in all.

Your accounts are backed by Navy Federal’s assets and reserves. For an update on our operating statistics, please visit About Navy Federal.

We invest your savings primarily in loans to fellow members. The remainder goes in U.S. securities and federally insured banks.

Accounts are audited regularly by nationally known firms of certified public accountants.

My question to you all is what risks am I taking if the bank had trouble maintaining the investment above the $1 per share return mark. Is this account backed so that the share price cannot fall below $1. I know that they are still offering 100% loans to memebers and have been pushing them just like all the other institutions for years. If my savings are being backed by bad loans that members took out on their properties how much risk am I taking? I just heard on NPR about a school district that lost all of its current operating funds due to the bank putting a hold on all withdrawls of a money market account due to problems with its investments in certain types of commercial paper. The school had to put a freeze on all wages. Could I end up in the same situation as them?

Since this question may apply to others in this situation what would you do with the money if it was yours other then put it in a regular savings account? Maybe a CD, but the rates seems very low for the commitment required? If you are pulling your money out of Money Market accounts where are you putting it.

I would like to thank you all for the time you put into the work here. I have been reading the board for over a year now, and lurk on a daily basis. Your sound reasoning and positive outlook (most of the time) on the realites the housing market and the economy in this country are facing is refreshing. I am also studying business part time and find the information in this board has provided real word applications to many of the subjects I have been studying. Not to take up much more space but I can’t thank you all enough.

[New_Renter]

For the absolute highest level of safety choose a Treasury Money Market, such as Vangard Treasury Money Market (VMPXX). The return is very close to the 90/180-day T-Bill with rock-bottom expenses of .24%. Better yet, you can buy T-Bills and Notes direct from the Govt. at http://www.treasurydirect.gov, then you eliminate the fund expense and get the full market rate.

[New_Renter]

For the absolute highest level of safety choose a Treasury Money Market, such as Vangard Treasury Money Market (VMPXX). The return is very close to the 90/180-day T-Bill with rock-bottom expenses of .24%. Better yet, you can buy T-Bills and Notes direct from the Govt. at http://www.treasurydirect.gov, then you eliminate the fund expense and get the full market rate.

[New_Renter]

For the absolute highest level of safety choose a Treasury Money Market, such as Vangard Treasury Money Market (VMPXX). The return is very close to the 90/180-day T-Bill with rock-bottom expenses of .24%. Better yet, you can buy T-Bills and Notes direct from the Govt. at http://www.treasurydirect.gov, then you eliminate the fund expense and get the full market rate.

[New_Renter]

For the absolute highest level of safety choose a Treasury Money Market, such as Vangard Treasury Money Market (VMPXX). The return is very close to the 90/180-day T-Bill with rock-bottom expenses of .24%. Better yet, you can buy T-Bills and Notes direct from the Govt. at http://www.treasurydirect.gov, then you eliminate the fund expense and get the full market rate.

[New_Renter]

For the absolute highest level of safety choose a Treasury Money Market, such as Vangard Treasury Money Market (VMPXX). The return is very close to the 90/180-day T-Bill with rock-bottom expenses of .24%. Better yet, you can buy T-Bills and Notes direct from the Govt. at http://www.treasurydirect.gov, then you eliminate the fund expense and get the full market rate.

[Jim Jones]

Thanks New_Renter I will take that on as an option for security purposes.

But more directly to my original question is there any risk which I should be concerned with the current Money Market account which I am invested in?

Also what is everyone else doing with their money? I am a novice when it comes to investing and am smart enough to know that a savings account won’t cut it but not savvy enough to walk into investing with the DOW and S&P all over the map and the subprime problem finally getting the notice it deserves. My gut tells me to sit on the sidelines until this cools off, but are there any other safe investments out there short of T-Bills and CD’s?

[Jim Jones]

Thanks New_Renter I will take that on as an option for security purposes.

But more directly to my original question is there any risk which I should be concerned with the current Money Market account which I am invested in?

Also what is everyone else doing with their money? I am a novice when it comes to investing and am smart enough to know that a savings account won’t cut it but not savvy enough to walk into investing with the DOW and S&P all over the map and the subprime problem finally getting the notice it deserves. My gut tells me to sit on the sidelines until this cools off, but are there any other safe investments out there short of T-Bills and CD’s?

[Jim Jones]

Thanks New_Renter I will take that on as an option for security purposes.

But more directly to my original question is there any risk which I should be concerned with the current Money Market account which I am invested in?

Also what is everyone else doing with their money? I am a novice when it comes to investing and am smart enough to know that a savings account won’t cut it but not savvy enough to walk into investing with the DOW and S&P all over the map and the subprime problem finally getting the notice it deserves. My gut tells me to sit on the sidelines until this cools off, but are there any other safe investments out there short of T-Bills and CD’s?

[Jim Jones]

Thanks New_Renter I will take that on as an option for security purposes.

But more directly to my original question is there any risk which I should be concerned with the current Money Market account which I am invested in?

Also what is everyone else doing with their money? I am a novice when it comes to investing and am smart enough to know that a savings account won’t cut it but not savvy enough to walk into investing with the DOW and S&P all over the map and the subprime problem finally getting the notice it deserves. My gut tells me to sit on the sidelines until this cools off, but are there any other safe investments out there short of T-Bills and CD’s?

[Jim Jones]

Thanks New_Renter I will take that on as an option for security purposes.

But more directly to my original question is there any risk which I should be concerned with the current Money Market account which I am invested in?

Also what is everyone else doing with their money? I am a novice when it comes to investing and am smart enough to know that a savings account won’t cut it but not savvy enough to walk into investing with the DOW and S&P all over the map and the subprime problem finally getting the notice it deserves. My gut tells me to sit on the sidelines until this cools off, but are there any other safe investments out there short of T-Bills and CD’s?

[eikoph]

I think your concern is not misplaced. Back in September, I switched money from a money market fund that had somewhere between 8-20% exposure to mortgage backed securities and/or collateralized debt obligations, to a money market fund that was solely invested in US Treasuries (the Vanguard fund mentioned in a reply above). The New York Times article below explains the risk that normally "safe" money market funds are facing and that many will likely require bail-outs to prevent them from "breaking the buck".

Investor Safe Haven Becomes a Concern, New York Times, Nov 14

[eikoph]

I think your concern is not misplaced. Back in September, I switched money from a money market fund that had somewhere between 8-20% exposure to mortgage backed securities and/or collateralized debt obligations, to a money market fund that was solely invested in US Treasuries (the Vanguard fund mentioned in a reply above). The New York Times article below explains the risk that normally "safe" money market funds are facing and that many will likely require bail-outs to prevent them from "breaking the buck".

Investor Safe Haven Becomes a Concern, New York Times, Nov 14

[eikoph]

I think your concern is not misplaced. Back in September, I switched money from a money market fund that had somewhere between 8-20% exposure to mortgage backed securities and/or collateralized debt obligations, to a money market fund that was solely invested in US Treasuries (the Vanguard fund mentioned in a reply above). The New York Times article below explains the risk that normally "safe" money market funds are facing and that many will likely require bail-outs to prevent them from "breaking the buck".

Investor Safe Haven Becomes a Concern, New York Times, Nov 14

[eikoph]

I think your concern is not misplaced. Back in September, I switched money from a money market fund that had somewhere between 8-20% exposure to mortgage backed securities and/or collateralized debt obligations, to a money market fund that was solely invested in US Treasuries (the Vanguard fund mentioned in a reply above). The New York Times article below explains the risk that normally "safe" money market funds are facing and that many will likely require bail-outs to prevent them from "breaking the buck".

Investor Safe Haven Becomes a Concern, New York Times, Nov 14

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