"The Reserve" Serves Edgy Stale Crow!

Edgy found out yesterday that his money market fund was closed down. Yes, that's right, Edgy himself was one of the test cases that apparently prompted Paulson call for another huge bailout, this time for money funds! (Too late to help Edgy, it seems, but Edgy expects to pay for the bailout anyway.) Edgy's fund is run by a company called "The Reserve," and it's called the "Yield Plus Fund." It seems that 16.7% of its holdings were invested in another fund run by The Reserve, and that fund had trouble. There's some talk of lawsuits because of the way The Reserve handled the redemptions, giving its big customers first crack at the funds and leaving the little guys (like Edgy) with the remainders.

You don't expect to lose money in a money market fund. In fact, the prospectus for Edgy's fund says, "The cash entrusted to us is your reserve resource that you expect to be there no matter what. This is why we call ourselves The Reserve. Be you an individual, institution or a Fortune 500 company, this is your working capital to pay the rent, to finance inventory and receivables, to put food on the table. This is definitely not money to take risks with, and that is exactly how it should be managed."

Ha ha! It would be ironic if it weren't so... well, let's just say it is ironic. Meanwhile, they've said the losses will be at least 3% and have suspended redemptions from the fund. It sounds like Edgy will be very lucky to get anywhere near his original investment back "to put food on the table." At least there's plenty of leftover crow to eat....