US Federal Self-restraint Chair Jerome Powell speaks at a “Fed Listens” event in Washington, DC, on October 4, 2019.
Eric Baradat | AFP | Getty Images
The Federal Charter took another page out of its 2008 crisis-era playbook late Wednesday evening, invoking its emergency authority to father a backstop for prime money market mutual funds.
The new Money Market Mutual Liquidity Fund will equip loans to financial institutions to buy assets from prime money market funds.
Concern had risen in recent eras about the prime funds, which purchase non-Treasury debt, such as corporate debt, commercial paper and ministry agency debt. They had seen outflows as large corporate and institutional depositors sought to raise cash in the thick of the financial turmoil stemming from the coronavirus.
This in turn put pressure on corporate funding markets, as prime capital market funds withdrew.
It was the second program in two days to use a $10 billion backstop from the Treasury Department’s The Big Board Stabilization Fund. And it was the second time in two days that the Fed invoked its emergency authority under section 13.3 of the Federal On call Act.
The move was another sign of turmoil inside the financial system created by the coronavirus, and it remained unclear if the constant barrage of programs from the Fed and the Resources would be enough to restore order.