Are Money Market Funds Safe?

Maybe not. According to the NY Post

Fidelity's Cash Reserves prospectus indicates that, as of May 31, 26 percent of its $98.2 billion portfolio was in repurchase agreements with Wall Street's investment banks.

Fidelity accepted billions of dollars worth of "mortgage-loan obligations"as collateral for the trades, although it doesn't note whether those are riskier "private label" mortgages, or the triple-A bonds guaranteed by Freddie Mac and Fannie Mae.

The money-management giant also has 1.7 percent in collateralized debt obligations, or bonds made from other bonds, a market that has seen billions of dollars of credit downgrades.

Fidelity also has plenty of indirect exposure to the mortgage-security market via its investment in the commercial-paper subsidiary of Countrywide Financial, a mortgage lender whose portfolios have suffered sharp credit losses from homeowner defaults.

The commercial-paper market - ultra-short term, publicly traded corporate debt -has been rocked by the inability of several subprime mortgage companies to meet
their obligations.

A Fidelity spokeswoman told The Post, "We are very comfortable with the holdings in cash reserves."

I'm glad they're "comfortable". I'm not. These are the same type of people who said a week ago that the "subprime" mess was contained.