Document Type

Case Study

Case Series

Market Liquidity Programs

JEL Codes

G01, G28


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.

Date Revised