Fed sets up program to buy mutual fund assets

The Federal Reserve invoked emergency authority to purchase assets from money-market mutual funds that are having difficulty meeting redemptions from their investors.

"The short-term debt markets have been under considerable strain in recent weeks as money market mutual funds and other investors have had difficulty selling assets to satisfy redemption requests," the Fed said in a statement released in Washington yesterday. The new program "should improve the liquidity position of money market investors."

The Fed will lend to a series of special units that will buy certificates of deposit, bank notes and commercial paper with a remaining maturity of 90 days or less. The new effort is called the Money Market Investor Funding Facility, and is aimed at supporting a private-sector initiative, the Fed said.