20% SHARP SHOOTERS - CHART TIMING

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Danger! Money market funds:

I swear, when MMF only get 0.02% how in the hell can funds like Vanguard fuck up and expose savers. It isn't that hard. Bottom line is if you thought your MMF is safe. Think again. These morons have exposure to PIGGS default risk through ECB banks shortterm paper.

END THE FED AND SEC ect... Article follows:

-But some investors say comments signal Fed ready to provide support

-Some reduce maturities of euro-zone commercial paper while others move to US Treasury bills, but near-zero return hurts performance


By Min Zeng and Luca Di Leo
Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--By highlighting problems with the exposure of U.S. money market funds to the euro-zone crisis, Federal Reserve Chairman Ben Bernanke has added to market anxiety about the threat of global contagion from the Greek debt problem.

Answering a question during Wednesday's press conference about the U.S. financial system's exposure to Greece's problems, Bernanke went to great lengths to explain how U.S. institutions had very little "direct exposure" to Greece but considerable "indirect exposure" via their loans to European banks that have loaned to Greece. He drew attention to U.S. money market funds' "very substantial" holdings of European bank-issued commercial paper, which others have estimated to represent a whopping 40% of their assets.

Simply by making these remarks, Bernanke led some traders on money market desks to ponder whether the Fed, which has oversight over these markets, knows something they don't about the risks. This, market participants said, added to nerves and to a broad-based selloff in stocks and commodities earlier Thursday. In a key sign that safety was trumping returns in investors' mind, yields on some of the shortest-maturities Treasury securities were pushed down to almost zero.

Yet some money fund investors said Bernanke's views could equally be read in a positive light, perhaps suggesting that policy makers are closely monitoring the situation and stand ready to provide liquidity should the crisis spread. Unlike the situation before the 2008 financial crisis, central banks in the U.S. and Europe have flooded the banking system with trillions of dollars in cheap funding and the Fed has developed various new tools for adding liquidity.

"We have been through this regimen and policy makers now know what the linkages are and what problems can be solved," said Ward McCarthy, chief financial economist within the fixed income group at Jefferies & Co.

Still, memories of the chaos that followed the demise of Lehman Brothers in 2008 are strong and tend to color how investors, including U.S. money funds, respond to troubling events, such as the Greek crisis. As of the end of May, most of these funds had exited their holdings of securities issued by banks in Greece, Ireland and Portugal. But they still face risks in their enormous short-term loans to banks from the core euro-zone nations, such as Germany and France.

The fear is that a default by Greece or a disorderly restructuring of the nation's debt could create contagion in the bond markets of other troubled sovereigns, thereby doing damage to the balance sheets of banks that have loaned to those governments. This could then raise fears about counterparty credit risks in short-term lending markets and, in a worst-case scenario, the paralysis of this vital source of bank funding.

The involvement of U.S. money market funds in Europe was one of the Fed's main concerns when the Greek debt crisis first erupted more than a year ago, said Roberto Perli, a former staffer at the central bank who's now managing director of policy research at ISI in Washington.

"The risk is that investors decide to run first and ask questions later," said Perli, who worked on the special lending programs the Fed crafted to backstop money funds in the wake of Lehman's blowup.

Indications are that many money funds have lately become more selective toward European banks' assets and are willing only to lend in shorter maturities. For example, Jeff Given, portfolio manager with Manulife Asset Management in Boston, who oversees $17 billion in fixed income assets, including money market funds, said he is now unlikely to buy commercial paper sold by euro-zone banks with maturities longer than 30 days.

Others have shifted funds back to U.S. money markets, mostly into T-bills. But that means they are abandoning higher-yielding European securities and moving back to T-bills that are now yielding close to zero, in part because of the Fed's ultraloose monetary policy. That leaves them earning less on those investments than they are paying out in management fees.

"Options for money funds are extremely limited and the paltry yield in the U.S. money markets" hurt the returns for the money funds, said Thomas Urano, portfolio manager in Austin, Texas, at Sage Advisory Services Ltd., which oversees $9.5 billion in assets including money market assets.

(Min Zeng writes about global fixed income and currency markets for Dow Jones Newswires. He can be reached at 212-416-2229 or via email at: [e-mail])

--Luca Di Leo contributed to the story.