Comments on: How the money-market rescue operation worked http://blogs.reuters.com/felix-salmon/2011/08/24/how-the-money-market-rescue-operation-worked/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: AngryInCali http://blogs.reuters.com/felix-salmon/2011/08/24/how-the-money-market-rescue-operation-worked/comment-page-1/#comment-30110 Fri, 26 Aug 2011 04:56:30 +0000 http://blogs.reuters.com/felix-salmon/?p=9541#comment-30110 And the bigger story is that the government looked the other way as money market funds became as systematically and socially important as savings accounts. There is a scandal, in that the Fed was forced to put something together at the last minute, instead of relying on some sort of deposit insurance. The fact that it worked out fine this time is cause for relief, but not celebration.

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By: y2kurtus http://blogs.reuters.com/felix-salmon/2011/08/24/how-the-money-market-rescue-operation-worked/comment-page-1/#comment-30098 Fri, 26 Aug 2011 01:23:20 +0000 http://blogs.reuters.com/felix-salmon/?p=9541#comment-30098 ErnieD nailed it…

The Bloomberg headline should have been something like:

Investigation shows Fed acted quickly with dubious legal authority or proper planning… and got it pretty much exactly right.

The MMMF’s the fed rescued had a liquidity problem not a solvency problem.

The best part of the whole story is that MMMF’s have been hugely regulated post crisis. The result is that the whole business is actually shrinking. There just isn’t any money to be made by the customers or the providers.

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By: Danny_Black http://blogs.reuters.com/felix-salmon/2011/08/24/how-the-money-market-rescue-operation-worked/comment-page-1/#comment-30043 Thu, 25 Aug 2011 12:20:31 +0000 http://blogs.reuters.com/felix-salmon/?p=9541#comment-30043 nbywardslog, would worry about the Bloomberg “data”, it was mostly nonsense anyway and i would be worrying about Chinese banks not EU ones.

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By: ErnieD http://blogs.reuters.com/felix-salmon/2011/08/24/how-the-money-market-rescue-operation-worked/comment-page-1/#comment-30016 Wed, 24 Aug 2011 21:37:08 +0000 http://blogs.reuters.com/felix-salmon/?p=9541#comment-30016 I think that this was one of the most necessary, but with relatively low moral hazard, operations in the crisis. The Fed provided liquidity to a market that desparately needed it while it was clear that the vast majority of the securities in the money market funds were still fine and would pay out 100 cents on the dollar. It was a classic run on the bank and the Fed provided the back stop.

Money market funds that turned out to have unexpected wrinkles were sued and so there is less liekly to be hanky-panky with these funds down the road, although the temptation to grab for yield is still huge because of ZIRP.

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By: absinthe http://blogs.reuters.com/felix-salmon/2011/08/24/how-the-money-market-rescue-operation-worked/comment-page-1/#comment-30008 Wed, 24 Aug 2011 18:58:00 +0000 http://blogs.reuters.com/felix-salmon/?p=9541#comment-30008 What do you think the rate would have been had there been a competitive bidding process?

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By: mwwaters http://blogs.reuters.com/felix-salmon/2011/08/24/how-the-money-market-rescue-operation-worked/comment-page-1/#comment-30006 Wed, 24 Aug 2011 18:29:51 +0000 http://blogs.reuters.com/felix-salmon/?p=9541#comment-30006 m.jed,

The Fed’s site on the program references part 3 of section 13 here:

http://www.federalreserve.gov/aboutthefe d/section13.htm

Have fun trying to figure the law on unusual and exigent circumstances out. The basic gist seems to be that there are a lot of restrictions for the Fed’s lending in unusual and exigent circumstances, i.e. that procedures are in place to protect against lending to insolvent banks. So they couldn’t go to money market funds directly, but instead go to two banks with good balance sheets.

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By: klhoughton http://blogs.reuters.com/felix-salmon/2011/08/24/how-the-money-market-rescue-operation-worked/comment-page-1/#comment-30005 Wed, 24 Aug 2011 18:08:10 +0000 http://blogs.reuters.com/felix-salmon/?p=9541#comment-30005 “It’s also worth noting that the Fed itself made much greater profits on the program than the banks did: some $543 million in total.”

Yes, and the Fed’s PNFT (Profits Not From Treasury) is somewhere around, what, -$200B??

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By: m.jed http://blogs.reuters.com/felix-salmon/2011/08/24/how-the-money-market-rescue-operation-worked/comment-page-1/#comment-30004 Wed, 24 Aug 2011 18:05:07 +0000 http://blogs.reuters.com/felix-salmon/?p=9541#comment-30004 “it was legally incapable of conducting this operation itself;”

Can you expand on this? What was the legal prohibition of the Fed doing this directly with the money market funds?

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