Personal Finance Blog By MoneyRates - October 2008

Three of the largest mutual fund money market management companies have joined the long list of companies opting to participate in the Treasury Department's emergency insurance program for money funds. Fidelity Investments, T.Rowe Price, and Vanguard, who combined hold an estimated $1 trillion in money market funds, all have officially signed up for the program according to information on their respective websites.

Under the program, the government will guarantee the share price of any publicly offered eligible money market mutual fund (money fund) that applies for and pays a fee to participate in the Treasury Department program. The insurance coverage would apply only to investments held in participating money market funds on September 19, 2008.

Investors who were panicked by earlier media reports of mutual fund companies "breaking the buck" and dropping the share price on money market funds below $1, can find more information about the program and the benefits at the Treasury Department’s web site at www.ustreas.gov.

The FDIC website has a detailed description of the new insurance law which was enacted as part of the Economic Stabilization Plan. Listed below is the FDIC's description of the new law:

FDIC Deposit Insurance Coverage

The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the United States government that protects against the loss of insured deposits if an FDIC-insured bank or savings association fails. FDIC deposit insurance is backed by the full faith and credit of the United States government. Since the FDIC was established, no depositor has ever lost a single penny of FDIC-insured funds.

FDIC insurance covers funds in deposit accounts, including checking and savings accounts, money market deposit accounts and certificates of deposit (CDs). FDIC insurance does not, however, cover other financial products and services that insured banks may offer, such as stocks, bonds, mutual fund shares, life insurance policies, annuities or municipal securities.

There is no need for depositors to apply for FDIC insurance or even to request it. Coverage is automatic.

To ensure funds are fully protected, depositors should understand their deposit insurance coverage limits. The FDIC provides separate insurance coverage for deposits held in different ownership categories such as single accounts, joint accounts, Individual Retirement Accounts (IRAs) and trust accounts. Deposits accounts owned by corporations, partnerships, unincorporated associations, employee benefit plans and government entities also are covered by FDIC insurance.

Basic FDIC Deposit Insurance Coverage Limits*

Single Accounts (owned by one person) $250,000 per owner**

Joint Accounts (two or more persons) $250,000 per co-owner**

IRAs and certain other retirement accounts $250,000 per owner

Trust Accounts $250,000 per owner per beneficiary subject to specific limitations and requirements**

Corporation, Partnership and Unincorporated Association Accounts $250,000 per corporation, partnership or unincorporated association

Employee Benefit Plan Accounts $250,000 for the non-contingent, ascertainable interest of each participant

Government Accounts $250,000 per official custodian

* These deposit insurance coverage limits refer to the total of all deposits that an accountholder (or accountholders) has at each FDIC-insured bank. The listing above shows only the most common ownership categories that apply to individual and family deposits, and assumes that all FDIC requirements are met.

** The legislation authorizing the increase in deposit insurance coverage limits makes the change effective October 3, 2008, through December 31, 2009.

If you have questions about FDIC coverage limits and requirements, please visit www.myFDICinsurance.gov, call toll-free 1-877-ASK-FDIC, or ask a representative at your bank.

Source: FDIC.gov

Global stock market selloffs and dire economic predictions have prompted a concerted effort by central banks to calm financial markets. Central Banks in the United States and Europe have lowered their key lending rate 50 points today.

Joint statement Issued 10/8/2008:

Throughout the current financial crisis, central banks have engaged in
continuous close consultation and have cooperated in unprecedented joint actions such as the provision of liquidity to reduce strains in financial markets.

Some easing of global monetary conditions is therefore warranted.
Accordingly, the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, Sveriges Riksbank, and the Swiss National Bank are today announcing reductions in policy interest rates. The Bank of Japan expresses its strong support of these policy actions.

Consumers in the United State should feel the effects of lower interest rates as all credit cards and loans which are indexed to the Prime Rate (now 4.50%) will be lower. Bank deposit rates will be effected as well over the next few weeks.

The stock market in the United States as measured by the Dow Jones Industrial average has fallen below the psychological threshold of 10,000 inter-day. Today's global markets are also down in what could be one of the largest single days global loss of wealth in history:

Dow Jones Industrial Average -4.1%

NASDAQ -5.4%

S&P 500 -4.8%

London -7.3%

Paris -9.0%

Frankfurt -7.1%

Tokyo -4.3%

Hong Kong -2.9%

Toronto -6.00%

Mexico - 5.6%

The great losses in the stock market has renewed interest in US Treasuries, Gold, and Bank Deposits. Investors are so anxious to buy short-term T-Bills that the yields on the 3-month (0.28%) and 6-month T-Bill (0.87%) have both been pushed below 1%. Gold is up $29 today, but is still far below the $1,000 price level and is still a fluctuating commodity that is difficult to forecast. The highest rates on bank money market accounts are at 4.00%, but are only FDIC-insured up to $100,000 per depositor unless an investor wants to make advantage of the Congressional bill that temporarily lifts the limits to $250,000.