Reserve Primary money market fund breaks a buck

— -- If you want to know how severe the financial industry crisis is, here's further proof: The share price of the Reserve Primary fund, a money market mutual fund, has fallen below the sacred $1 mark, thanks to the Lehman Bros. meltdown.

Money market funds have been the fund industry's haven for more than three decades, and investors often view them the same way they do bank checking accounts. The funds' safety record has attracted more than $3.5 trillion in assets.

Until now, no money fund open to the general public has ever allowed its share price to dip below a dollar — "breaking the buck," as it's called. (A small institutional money fund, Community Bankers Money fund, broke the buck in 1994.)

Money market funds have long feared that if they broke the buck, thereby shrinking investors' principal, people would shift their money into bank money market accounts or ultrasafe Treasury securities. The question now is whether other money funds will follow the Reserve fund in dipping below $1.

The $64.8 billion fund held $785 million in short-term IOUs, called commercial paper, issued by Lehman Bros., which filed for bankruptcy protection Monday.

The fund's board has valued the securities at zero, causing the fund's share price to fall to 97 cents. The fund has also put a seven-day hold on all redemption requests.

Investors who put in orders to remove money from the fund before Tuesday afternoon will get their money back at $1.00 a share. As for redemption orders that came in after 3 p.m. ET on Tuesday, the amount they get back depends on the fund's daily share price, calculated at 5 p.m. — a price that could vary depending on the performance of the fund's investments, and ability to raise capital to bring the asset level back up.

Reserve said Tuesday night that effective immediately, investors redeeming cash from the fund will not receive their money until as long as seven days later — the maximum allowed by law.

Calls to Reserve for further comment rang busy on Wednesday morning, the Associated Press said.