Clarifications from the U.S. Treasury on the new money market fund Guaranty Program

Hot off the presses, the U.S. Treasury just posted the following clarifications ("Treasury Provides Further Clarity For Guaranty Program for Money Market Funds") on their Web site within the past hour:

Washington – The U.S. Treasury Department is continuing to develop the specific details surrounding the temporary guaranty program for money market funds that was announced on September 19, 2008.

While these details are being finalized, Treasury is making the following clarifications:

1. All money market mutual funds that are regulated under Rule 2a-7 of the Investment Company Act of 1940 and are publicly offered and registered with the Securities and Exchange Commission will be eligible to participate in the program.

2. Eligible funds include both taxable and tax-exempt money market funds. The Treasury and the IRS intend to issue guidance that will confirm that participation in the temporary guaranty program will not be treated as a federal guaranty that jeopardizes the tax-exempt treatment of payments by tax-exempt money market funds.

3. The temporary guaranty program will be designed to provide coverage to shareholders for amounts held by them in such funds as of the close of business on September 19, 2008.

4. Further details on other aspects of the temporary guaranty program and the required documentation for funds to participate will be provided in the coming days.

That is all fine and dandy, except for point #3 which seems to suggest that only existing balance amounts as of Friday are covered, implying that any new monies deposited in money market funds will not be covered!!! I have trouble believing that will be the case, so it looks as if we need clarification of the clarification.

Either way, I personally am not worried for my own money since I continue to have high confidence in Fidelity.

-- Jack Krupansky