Money Market Investor Funding Facility (Fed)

From SourceWatch
Jump to: navigation, search

The Money Market Investor Funding Facility (Fed)

MMIFF was to provide liquidity to money market mutual funds to help them meet any redemption requests and other obligations. Investors had fled money market mutual funds following the failure of Lehman Brothers, but the structure of the MMIFF was seen as “cumbersome” by investors.[1] The program was terminated on Oct. 30, 2009.[2] No funds were ever used.[3]

Wall Street Bailout Accounting
(back to main table)
MONEY MARKET INVESTOR FUNDING FACILITY (FED)
Balance Sheet
Disbursed*: $0 [4]
Current outstanding: $0 [5]
Public Funds
Maximum at-risk: $600B [6]
Current at-risk: $0 [7]

* See the methodology and glossary for definitions of "disbursed," etc.

Funding agency and aid type

The funding agency was the Federal Reserve.

Credit line for liquidity for money market mutual funds.

Who benefits

Investment banks funning money market mutual funds.

Background

Notes

The MMIF was created under section 13(3) of the Federal Reserve Act.[8]

SIGTARP:[9]

“Money Market Investor Funding Facility (“MMIFF”) — Total Potential Support: $600 Billion. Money market funds are large investment funds that buy high-quality, short-term debt instruments such as Treasury securities and high-quality bank and corporate notes. Investors in money market funds want absolute safety for their principal and fast access to funds. In turn, banks and other financial intermediaries depend on the money market as a source of funds for their business and household customers. In 2008, this market experienced the same liquidity problems as other markets — that is, investors could not find buyers for securities they were seeking to sell when needed. To meet this liquidity need, the Federal Reserve created the Money Market Investor Funding Facility (“MMIFF”) on October 21, 2008. According to the Federal Reserve Board’s Monetary Report to Congress, “the Federal Reserve Bank of New York will provide senior secured funding to a series of SPVs to facilitate an industry-supported private-sector initiative to finance the purchase of eligible assets from eligible investors. Eligible assets include U.S. dollar-denominated certificates of deposit and commercial paper issued by highly rated financial institutions and having remaining maturities of 90 days or less.” The SPVs for the MMIFF are similar to the SPV for CPFF in that they purchase eligible money market paper using funds from MMIFF and asset-backed CP. FRBNY is committed to lending the SPVs 90% of the purchase price of eligible assets; sellers of assets to the SPV will receive that much in cash and the remaining 10% in asset-backed securities from the SPV. The MMIFF has not yet funded any purchases of money market instruments. Even without having advanced funds to the market, the program may be considered by the market to be working merely by its existence; investors are given the comfort that if they need it, it is available. The MMIFF SPVs are authorized through October 30, 2009.”

Via Prins:[10]

“In addition to U.S. 2a-7 money market mutual funds, eligible investors will include funds that are managed or owned by a U.S. bank, insurance company, pension fund, trust company, SEC-registered investment advisor or a U.S. state or local government entity and are required to (i) maintain a dollar-weighted average portfolio maturity of 90 days or less; (ii) hold the fund’s assets until maturity under usual circumstances; and (iii) hold only assets that, at time of purchase, are rated by an NRSRO in one of the top three long-term in- vestment-grade rating categories (e.g., A and above) or the top two short-term investment-grade rating categories (e.g., A-2 and above), or that are the credit equivalent thereof. Eligible investors will also include any U.S. dollar-denominated cash collateral reinvestment fund, account, or portfolio associated with securities lending transactions that is managed or owned by a U.S. bank, insurance company, pension fund, trust company, or SEC-registered investment advisor.”

Prins:[11]

“The MMIF was established in October 2008 to provide loans for investors buying certificates of deposit and commercial paper. According to SIGTARP, $600 billion was allocated for the program.”

Articles and resources

Related SourceWatch articles

References

  1. Scott Lanman, “Fed Commercial-Paper Purchases Expand in Program’s Seventh Week,” Bloomberg, Dec. 11, 2008.
  2. Federal Reserve Bank of New York, “Money Market Investor Funding Facility,” http://www.newyorkfed.org/markets/mmiff.html, accessed Mar. 13, 2010.
  3. Federal Reserve Bank of St. Louis, “WMMIFF, Net Portfolio Holdings of LLCs funded through the Money Market Investor Funding Facility (DISCONTINUED SERIES)”, accessed Mar. 13, 2010.
  4. Federal Reserve Bank of St. Louis, “Series WMMIFF: Net Portfolio Holdings of LLCs funded through the Money Market Investor Funding Facility (DISCONTINUED SERIES)”, [1], October 30, 2009.
  5. Federal Reserve Bank of St. Louis, “Series WMMIFF: Net Portfolio Holdings of LLCs funded through the Money Market Investor Funding Facility (DISCONTINUED SERIES)”, [2], October 30, 2009.
  6. Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), “Quarterly Report to Congress – July 21, 2009,”[ http://www.sigtarp.gov/reports/congress/2009/July2009_Quarterly_Report_to_Congress.pdf] pps. 143-144.
  7. Federal Reserve Bank of St. Louis, “Series WMMIFF: Net Portfolio Holdings of LLCs funded through the Money Market Investor Funding Facility (DISCONTINUED SERIES)”, [3], October 30, 2009.
  8. Federal Reserve press release, “Federal Reserve announced the creation of the Money Market Investor Funding Facility (MMIF),” Oct. 21, 2008, http://www.federalreserve.gov/monetarypolicy/20081021a.htm accessed Feb. 21, 2010.
  9. SIGTARP July 2009 report, p. 143-144.
  10. Marc Labonte, “Financial Turmoil: Federal Reserve Policy Responses”, CRS Report for Congress, October 23, 2008, p. 11; Board of Governors of the Federal Reserve System, “Report Pursuant to Section 129 of the Emergency Economic Stabilization Act of 2008: Money Market Investor Funding Facility,” http://www.federalreserve.gov/monetarypolicy/files/129mmiff.pdf (accessed July 30, 2009); Federal Reserve Bank of New York, Money Market Investor Funding Facility: Program Terms and Conditions, (accessed September 10, 2009).
  11. Prins’ Mother Jones analysis. Dec. 21, 2009. http://motherjones.com/politics/2009/12/behind-real-size-bailout

External resources

External articles

This article is a stub. You can help by expanding it.