Money Market Funds – A Destabilizing Systemic Risk?
Posted by William Byrnes on September 27, 2011
On September 17, 2008, $140 billion was drawn out of money market accounts by investors who were transferring their funds to U.S. Treasuries. The following day, the FDIC, realizing that money market accounts were being withdrawn in record amounts, deposited over $100 billion into the system.
But after realizing that an influx of cash wouldn’t be enough to prevent a collapse, the Treasury stepped in with a $250,000 guarantee per money market account. If the Treasury hadn’t taken this action, $5.5 trillion could have been drawn out of the market, which could have collapsed the entire U.S. economy.
Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all the planning libraries and client presentations if you are not already a subscriber).
For previous coverage of money market accounts in Advisor’s Journal, see How to Increase the FDIC $250,000 Permanent Guarantee (CC 10-67).
For in-depth analysis of the Dodd-Frank Act, see Advisor’s Main Library: The Dodd-Frank Wall Street Reform and Consumer Protection Act: An Analysis.