When you can’t pay, your stuff is tossed into the street. When banker’s can’t pay, the Fed steps in for the rescue.
"This is a one-in-a-100-year event in which there are extremely unusual correlations that no one prepared for," one banker warned. "We are in a situation where everyone is very scared."And you thought your money market savings were safe:
For example, one European money market fund was closed after reportedly losing 30% of its value because it held commercial paper backed by subprime loans. Money market funds are of course supposed to be safe and without price risk. In other words, the principal one invests is not supposed to be diminished, and when shareholders decide to cash-out, everyone expects to receive their principal and interest because money markets funds only buy interest-bearing paper and not equities. But as the shareholders of this European money market fund have now found out, their fund's net asset value dropped substantially because the fund owned commercial paper backed by subprime mortgages. So the question arises, how many more money market funds around the globe are going to be infected by the growing subprime contagion because they own commercial paper backed by subprime loans?