Bank of America
Nell Redmond
A Bank of America branch.
The fund, the Columbia Strategic Cash Portfolio, last week saw its net asset value fall below the $1 per share that all such funds try to keep.
The move is significant -- money market funds are among the safest investments Wall Street offers because they invest in short-term securities. Analysts have been waiting for the point when money market funds hit the skids as an indication of the severity of the credit crunch.
The fund invested in short-term instruments such as structured investment vehicles, or SIVs, and was hurt by the subprime meltdown.
Late last week, Bank of America sent a letter to investors saying the fund was frozen until further notice. Today, a spokesman for Bank of America told CNBC that investors can redeem shares, but that the company is winding down its portfolio.
The move is the latest blow to Bank of America , which last month said it expects to write down $3 billion of debt in the fourth quarter because of subprime mortgage losses.
Bank of America also said in November it was setting aside $600 million to help money market mutual funds exposed to risky debt maintain the $1 per share net asset value.
It also was reserving $300 million for a troubled investment, and setting aside more money for other housing-related losses, including to homebuilders.
Bank of America is among a growing number of banks, including Citigroup
In the third quarter, Bank of America's profit from corporate and investment banking fell 93 percent, depressing overall earnings by 32 percent.
Chief Executive Kenneth Lewis announced 3,000 job cuts, and ordered a strategic review of the corporate and investment banking unit that should be completed by early 2008.
--Reuters contributed to this report.