This Is Not Good

Update: Rumors are floating that the Fed will come out today and cut interest rates.

Some money markets are halting redemptions. Just what does that mean?

Money markets are used by a whole lot of people like a savings account. In other words, they are very safe, very liquid and not at all a part of the credit problems. Yet panicy investors are requesting withdrawals at high rates .... runs on the bank ... if you will. For these guys to stop allowing people to withdraw their money is a sign of a significantly spreading panic.

This is a completely a no win situation for the institutions. If they halt redemptions, people panic more. If they liquidate assets to meet withdrawals, they risk bankruptcy. Why? Because right now the panic in the bond market has made even high quality bonds difficult if not impossible to trade. And if you can get a buyer, it's at a significant loss.