Treasury, Fed move to strengthen money market funds

WASHINGTON (AP) -- The Treasury Department and the Federal Reserve have come up with separate actions designed to shore up the nation's 2 trillion dollars of assets in money market funds.

The Treasury plans to tap a Depression-era fund to provide guarantees for the money market mutual funds.

The Fed, meanwhile, says it will expand its emergency lending efforts to let commercial banks finance purchases of asset-backed paper from money market funds. That should help the funds meet demands for redemptions.

The central bank also says it plans to buy short-term debt obligations issued by Fannie Mae, Freddie Mac and the Federal Home Loan Banks, which provide low-cost funding for mortgages, small businesses and farms. The aim is to pump money into the financial system and persuade banks to begin lending again and stop hoarding cash.

(Copyright 2008 by The Associated Press. All Rights Reserved.)

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