READYING FOR BAILOUTS:OPERATORS OF money market funds, which manage a record $3,500 billion (€2,400 billion), were yesterday rushing to reassure investors while bracing themselves to make further bailouts of their funds

There were fears of a run on funds following news that one had "broken the buck".

Wachovia said it would back $494 million (€350 million) worth of Lehman Brothers debt held in its Evergreen money market funds rather than let the funds fall below the amount investors paid in - or "breaking the buck".

The Reserve Primary Fund, the oldest in the US, said on Tuesday that investors could lose money as a result of it holding debt in Lehman. It is the first time in 14 years the value of a money market fund has been allowed to fall below the amount investors paid in and is a signal that ripples from the financial crisis have begun to affect retail investors directly.

Money market funds' safety has been of serious concern to regulators because retail investors consider them to be as secure as a bank account - but they have lost value during the credit crisis and are not backed by government guarantees.

In a sign that it expected further bailouts, the US Securities and Exchange Commission said yesterday that management companies providing support for their money market funds did not have to bring the funds' assets on to balance sheets.

- (Financial Times service)