http://investing.reuters.co.uk/news/articleinvesting.aspx?type=fundsNews&storyID=2007-10-17T071404Z_01_NOA725935_RTRUKOC_0_ANALYSIS-EBAY.xml

EBay customers' cash linked to risky assetsWed Oct 17, 2007 8:14 AM BST
Email This Article | Print This Article | RSS [-] Text [+] By Tim McLaughlin

NEW YORK (Reuters) - EBay customers who park extra cash in a nearly $1 billion (490 million pounds) PayPal money market fund are exposed to the same type of assets targeted for an emergency bailout by the largest U.S. banks, regulatory filings show.

PayPal Money Market Fund, whose popularity has mushroomed with online consumers, is invested in a portfolio that contains structured investment vehicles, or SIVs, linked to troubled subprime loans and other debt.

The risk surrounding these illiquid assets has forced the largest U.S. banks to attempt to create a roughly $80 billion rescue fund to prevent SIV assets from plummeting in value.

The PayPal fund was No. 2 among 248 first-tier retail funds over the past five years as of September 30, according to iMoneyNet. Many other money market funds are also exposed to risky assets in the hunt for better returns, experts said.

The PayPal fund demonstrates the reach of complex securities packaged by large banks such as Citigroup.

SIVs are created to capitalize on the differences in yields between risky subprime loans, for example, and short-term debt like commercial paper.

PayPal's money market fund is a feeder fund that invests all of its assets in a $26 billion master portfolio run by Barclays Global Fund Advisors. Continued...

The fun in the credit markets is just beginning...watch your back.