The Money Market Investor Funding Facility (U.S. GFC)

Journal of Financial Crises: Vol. 2 : Iss. 3, 257-280. Available at: https://elischolar.library.yale.edu/journal-of-financial-crises/vol2/iss3/9

Yale Program on Financial Stability Working Paper

24 Pages Posted: 26 Oct 2020

See all articles by Rosalind Wiggins

Rosalind Wiggins

Yale Program on Financial Stability

Date Written: October 10, 2020

Abstract

In mid-September 2008, money market mutual funds (MMMFs) began to experience run-like redemption requests after the Reserve Primary Fund “broke the buck.” As a result, MMMFs became reluctant to roll over or invest in commercial paper (CP) and faced the prospect of selling asset-backed commercial paper (ABCP) they held into a declining market to raise cash. The money markets quickly became negatively impacted, and on October 21, 2008, the Fed announced the Money Market Investor Funding Facility (MMIFF), which would loan funds to a series of special purpose vehicles (SPVs) established by the private sector. The SPVs would use the funds (and proceeds from ABCP that they issued) to purchase eligible US dollar–denominated money market instruments (certificates of deposit, bank notes, and CP) from eligible money market investors, a group originally limited to MMMFs. The Fed authorized up to $540 billion for the MMIFF, which would have facilitated the purchase of $600 billion of assets. No fund accessed the facility, however, and it was closed on October 30, 2009. Although not utilized, it cannot conclusively be said whether the availability of the MMIFF had an impact on the market. Any such impact is difficult to isolate given the coexistence of other government programs aimed at addressing similar stresses.

Keywords: money market mutual funds (MMMFs), certificates of deposit, commercial paper, asset-backed commercial paper (ABCP), wholesale funding, MMIFF, AMLF, Reserve Primary Fund, break the buck

JEL Classification: G01,G28

Suggested Citation

Wiggins, Rosalind, The Money Market Investor Funding Facility (U.S. GFC) (October 10, 2020). Journal of Financial Crises: Vol. 2 : Iss. 3, 257-280. Available at: https://elischolar.library.yale.edu/journal-of-financial-crises/vol2/iss3/9, Yale Program on Financial Stability Working Paper, Available at SSRN: https://ssrn.com/abstract=3717262

Rosalind Wiggins (Contact Author)

Yale Program on Financial Stability ( email )

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States

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