Find out about the secret $2.7 trillion bailout of Money Market Mutual Funds MMMFs in 2008. The collapse of Lehman Brothers its commercial paper default caused the Primary Reserve Fund to "break the buck" or sell for less than $1.00 per share.
Wilson, Linus, Broken Bucks: Money Funds that Took Taxpayer Guarantees in 2008 (August 28, 2015). Available at SSRN: https://ssrn.com/abstract=2195358 or http://dx.doi.org/10.2139/ssrn.2195358
The U.S. Treasury rolled out a bailout guarantee on September 19, 2008 without Congressional approval using the exchange rate stabilization fund led by Hank Paulson, David Nason, and Steve Shafran. Paulson and Shafran were Goldman Sach alums (p. 263) ON THE BRINK by Henry Paulson.
Broken Bucks: Money Funds that Took Taxpayer Guarantees in 2008
42 Pages Posted: 2 Jan 2013 Last revised: 29 Aug 2015
Linus Wilson
University of Louisiana at Lafayette - College of Business Administration
Date Written: August 28, 2015
Abstract
This is the first study to look at the characteristics of funds accepting the $2.7 trillion taxpayer guarantee of money market mutual funds during the 2008 financial crisis. Funds with lower asset maturities were significantly less likely to need federal or sponsor bailouts. Fund shares that benefited from Federal Reserve’s asset-backed commercial paper program were significantly more likely to get bailed out by taxpayers and sponsors. Finally, the paper tests if funds adhering to the SEC’s 2010 liquidity reforms prior to their enactment were less likely to be bailed out in 2008.
Keywords: breaking the buck, bailout, Dodd-Frank, DLA, exchange rate stabilization fund, Financial Stability Oversight Council (FSOC), guarantees, liquidity, money market mutual funds, Primary Reserve Fund, regulation, SEC, Securities and Exchange Commission, U.S. Treasury, WAL, WAM, WLA
JEL Classification: G01, G18, G22, G23, G28, H12, H81, L5
Music by www.BenSound.com
(c) Linus Wilson, 2019
www.linuswilson.com
www.financeprofessor.org
Janna Wilson performs Minuet by Boccherini.
”Saving the Toughest for Last: 50th Completers’ Final U.S. State High Points” by Linus Wilson
”Does Difficulty Affect U.S. State High Points Ascents?” by Dr. Linus Wilson, Ep. 19
”The Fed Funds Risk-Premium after the Silicon Valley Bank Run and the Bank Term Funding Program (BTFP)” Ep. 18 by Dr. Linus Wilson
Profitable Timing of the Stock Market with the Senior Loan Officer Survey by Linus Wilson Ep. 17
Estimating the Value of Statistical Life (VSL) Losses from COVID-19 Infections in the United States
GPU Prices and Cryptocurrency Returns. Is the crypto boom creating a semiconductor shortage? with Linus Wilson #15
The Mystery of the COVID-19 Infection Fatality Rate (IFR) Unraveled (#14) with Dr. Linus Wilson
COVID-19: Save Lives or the Economy? The Benefits of Social Distancing in the Pandemic and the Value of Statistical Life (#13)
The 2020 Presidential Election: A Race Against Mortality (#12) by Linus Wilson
Ep. 11: Clickbait Works! The secret to getting views with the YouTube algorithm by Linus Wilson
Ep. 9: "A Dove to Hawk Ranking of the Martin to Yellen Federal Reserves" by Linus Wilson
Ep. 8: The Fed Boosts CMBS Markets "Toxic Asset Subsidies and the Early Redemption of TALF Loans" by Linus Wilson
Ep. 7: The Federal Reserve's $700 Billion Commercial Paper Bailout with Linus Wilson
Ep. 6: Andrew Metrick Presents "Managing and Preventing Financial Crises" at the 2017 Financial Management (FMA) Meetings in Boston
Ep. 5: Discrete Portfolio Adjustment with Fixed Transaction Costs
Ep. 4: Overpaid CEOs Got FDIC Debt Guarantees
Ep. 3: How to Compare Faculty Pay Across the Business School by Linus Wilson
Ep. 2: Crowdfunding on Patreon on The Finance Professor Podcast with Linus Wilson
Ep. 1: Introducing the Finance Professor Podcast by Linus Wilson
Create your
podcast in
minutes
It is Free
A Taste of TEDTalks
PragerU
The History of the Ottoman Empire
THED Talks
Secrets of the Campus Cadavers