Feds launch program to back investment funds
The Federal Reserve Board has announced a new program to support banks and other institutions while seeking to enhance the liquidity and functioning of crucial money markets.
The Money Market Mutual Fund Liquidity Facility, or MMLF, will make loans available to eligible financial institutions secured by high-quality assets purchased by the financial institution from money market mutual funds. This is being done so that as businesses and individuals pull funds out of money market funds - which are common investment tools for families, businesses, and a range of companies - there will be enough funds to cover the withdrawals.
The program is similar to the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, or AMLF, that operated from late 2008 to early 2010. However, it will purchase a wider range of assets.
The Department of the Treasury will provide $10 billion of credit protection to the Federal Reserve in connection with the MMLF from the Treasury's Exchange Stabilization Fund.
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