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Orchidflower · 10-03-2008, 07:40 AM

Yes, I am aware this is the dumbest question today, but I have been ultra-busy with familial duties lately and am unable to keep up like I should be doing:

So, what is the chance that--if this Bill does not pass--that the Fed will freeze mutual fund accounts? If accounts are frozen, it would make it impossible for us to withdraw our accounts from a brokerage. I got a little bit of that possibility on Bloomberg or some show, and started thinking yikes! Possible? Not possible? Talking out of their hat again as per usual?
I love the financial shows as they make everything SO dramatic.

dex · 10-03-2008, 07:44 AM

Where did this idea come from?

It happened in Argentina and it decimated the country.

Orchidflower · 10-03-2008, 07:52 AM

If I hear it or read it again, I will be able to tell you who said it.

riskadverse · 10-03-2008, 08:19 AM

Quote:

Originally Posted by Orchidflower

Yes, I am aware this is the dumbest question today, but I have been ultra-busy with familial duties lately and am unable to keep up like I should be doing:

So, what is the chance that--if this Bill does not pass--that the Fed will freeze mutual fund accounts? If accounts are frozen, it would make it impossible for us to withdraw our accounts from a brokerage. I got a little bit of that possibility on Bloomberg or some show, and started thinking yikes! Possible? Not possible? Talking out of their hat again as per usual?
I love the financial shows as they make everything SO dramatic.

I think it is not likely, but certainly possible. If there is a run on the mutual fund companies, there are some steps they can take to slow the redemptions, and they wouldn't be attractive. If it gets bad enough the SEC would probably close the market - call it circuit breakers or something - similar to 911. As long as the market is closed you would have a frozen situation. At that point the congress and the Fed would probably try some scheme similar to what is going on now with the investment banks.

Watching current hedge fund redemptions may give a clue as to some of the process.

Orchidflower · 10-03-2008, 09:20 AM

riskadverse: Thanks you for the response. Isn't there a run on mutual fund companies? But, so far, not heard they are freezing the accounts or am I incorrect on this information?

FinanceDude · 10-03-2008, 09:33 AM

Quote:

Originally Posted by Orchidflower

riskadverse: Thanks you for the response. Isn't there a run on mutual fund companies? But, so far, not heard they are freezing the accounts or am I incorrect on this information?

The only way to freeze accounts it to close the market, like they did after 9/11..........

cute fuzzy bunny · 10-03-2008, 10:36 AM

Which lately seems as though it might be a good idea.

riskadverse · 10-03-2008, 10:59 AM

Quote:

Originally Posted by Orchidflower

riskadverse: Thanks you for the response. Isn't there a run on mutual fund companies? But, so far, not heard they are freezing the accounts or am I incorrect on this information?

I wouldn't say there has been a run on mutual funds yet. There were significant withdrawals out of money market funds that the government slowed by stating the government would insure money markets (subject to some terms). Most people who have mutual funds have not been moving out of them. The bulk of mutual fund investors have a buy and hold attitude through the ups an downs of the markets. But, that could change overnight. The fund companies could slow the process (read your prospectus if you want to see how), but it would take the government to freeze the accounts, most likely by closing the market. This would be a drastic measure, but it is not without precedence.

Nords · 10-03-2008, 11:05 AM

Quote:

Originally Posted by Orchidflower

Yes, I am aware this is the dumbest question today...
So, what is the chance that--if this Bill does not pass--that the Fed will freeze mutual fund accounts? If accounts are frozen, it would make it impossible for us to withdraw our accounts from a brokerage. I got a little bit of that possibility on Bloomberg or some show, and started thinking yikes! Possible? Not possible? Talking out of their hat again as per usual?

I think this crosses the line from "concern" to "paranoid conspiracy theory".

But I bet there's a brisk market in gold bullion, MREs, & shotgun shells...

cute fuzzy bunny · 10-03-2008, 11:09 AM

The good news is you'll be able to buy all of that stuff for half price in a couple of months.

riskadverse · 10-03-2008, 11:25 AM

Quote:

Originally Posted by Nords

I think this crosses the line from "concern" to "paranoid conspiracy theory"....

As would much of what has happened recently (were it proposed as recently as 3 weeks ago).

Leonidas · 10-03-2008, 11:37 AM

Quote:

Originally Posted by Nords

I think this crosses the line from "concern" to "paranoid conspiracy theory".

But I bet there's a brisk market in gold bullion, MREs, & shotgun shells...

I've heard some anecdotal stories of frenzied buying of bullion and safes.

Animorph · 10-03-2008, 12:04 PM

I think this refers to money market funds, particularly the one that broke the buck.

Money market funds are allowed to delay redemptions by 7 days, which could be part of it.

Also, the MM that broke the buck was debating how best to liquidate. If it sells out now it gets poor prices on lots of its assets and may go lower than $0.97/share. Or it could delay, they were talking months, in order to hold some assets to maturity and maybe do better than $0.97/share in the end. The feds had initially told them to freeze sales for a short period of time, you'll have to look up the details.

That sounds like what you probably heard. Plus there's that fund that lots of schools use that has frozen redemptions. That sounds like another special case, not a normal mutual fund.