In 2003 and 2004, accounting irregularities in mortgage finance companies Fannie Mae and Freddie Mac grabbed the attention of every one in the world. The failure of Northern Rock in UK has shaken the public confidence in financial markets.Sub prime lending killed many homes dreams in US and UK. Global recession has turned many financial institutions and programmes in doldrums. Stability in the financial market is lost. Investors have become shaky about hazy dealing from financial institutions.
If the private sectors are to rebuild that confidence and trust, they must have transparency, respect and integrity. They must be central to the development of a successful and trustworthy brand in financial services. These values need to be introduced at the macro level. Sufficient confidence has to be built among customers that the banks have quality capital and that they can absorb the losses incurred in course of operation. Insurers must have the capacity to support liabilities. There is urgent need for sound back up by reliable institutions preferably government to all risk plans and transactions. Protection must come from the government through stable financial system. Products launched in the financial segment need scrutiny and approval by the authorities. Only then confidence of public and investors can be restored and stability can be promoted in the financial market. This can be more effectively done by the single institution of Government. FSA is on the work to strengthen and rebalance regulations that were lost in between so that lost confidence is restored in the financial system.
Sam Fleming, November 1,2007, Daily Mail, Credit crisis 'could cripple UK economy'
Keeping the above scenario in the mind there is need for opening such business fronts wherein investors have confidence, trust and reliability. Money market mutual funds have such face to restore the investors' confidence if backed by government. The industry represents a multibillion-dollar investment segment.
Money market accounts are popular alternatives to CD's, short-term bonds, and savings accounts. This is possible by competitive yields, daily access to the money, and a sense of safety and stability that a money market provides. Money market funds offered by the top banks and brokerage houses are also not immune to a loss in value or liquidity but they can present a better picture. Banks in the money market plan use the depositors' money in buying a large pool of very short term bond including, government bonds, corporate bonds, or municipal bonds, which are more secured. True money market funds are not a