Will PayPal money market fund break the buck?

5.5% of the $1.63 billion PayPal fund is in “illiquid assets.” Yup, more SIVs.

The rot continues to spread everywhere.

Bonus points for those of you can describe which Circle of Hell the investment manager at PayPal will be plunged into once the lynch mob is done with him.


  1. A couple of observations: First, Paypal is currently paying 4.7% on deposits, so the shortfall equates to 14 months interest expense for them. They can’t drop rates significantly without causing a run on their fund, but this does not seem to be an insurmountable shortfall.

    Second, Paypal is not FDIC insured, so if the fund does crash, the shortfall won’t get covered by the fed.

  2. eBay, their parent corporation, would undoubtedly bail out the fund if needed. They wouldn’t really have any other choice.

  3. A lot of non profits use pay pal to collect money and this puts them in jeopardy as well.

  4. If paypal goes under there is no FDIC insurance to bail you out. At least with a certificate of deposit from a bank CD you are covered up to $100,000.

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