Document Type

Case Study

Case Series

Account Guarantee Programs

JEL Codes

G01, G28


On September 16, 2008, following the collapse of Lehman Brothers, the Reserve Primary Fund “broke the buck,” meaning that its net asset value (NAV) fell more than 0.5% below the $1 per share target value maintained by money-market funds (MMFs). When the Reserve Primary Fund could not restore the NAV, investors began withdrawing funds from MMFs, leading to a $439 billion run on the MMF market. To stop this run, the US Department of the Treasury established the Temporary Guarantee Program for Money Market Funds (the Guarantee Program), which insured investors’ holdings in participating MMFs. The Guarantee Program was designed to protect assets held as of the announcement of the program on September 19, 2008. MMFs participating in the Guarantee Program paid a quarterly fee ranging from 1 to 1.5 basis points, depending on their NAV. The Guarantee Program, originally scheduled to last three months, was ultimately extended until September 18, 2009. During its year of operation, the Guarantee Program covered 93% of assets in the MMF market, equivalent to more than $3.2 trillion. There were no losses, and the Department of the Treasury did not make any payments through the Guarantee Program, generating a surplus of $1.2 billion in fees.

Date Revised