During the financial crisis, the U.S. Treasury implemented the Guarantee Program

Question

During the financial crisis, the U.S. Treasury implemented the Guarantee Program for Money Market Funds, which insured investors against losses on their existing money market mutual fund shares. In explaining the program, a Treasury statement noted that: "Maintaining confidence in the money market mutual fund industry was critical to protecting the integrity and stability of the global financial system." Source: U.S. Department of the Treasury, "Treasury Announces Expiration of Guarantee Program for Money Market Funds," September 18, 2009. Why is the money market mutual fund industry so important? A. The money market mutual fund industry is important because many firms rely on the access to commercial paper to meet payroll and other operating costs, and the elimination of this market would hurt access to this source of funding and have severe adverse consequences for the real economy. B. The money market mutual fund industry is not large enough to cause a severe impact on the entire financial system. C. The money market mutual fund industry is important because there is a high likelihood that the failure of the money market mutual fund industry would lead depositors to withdraw their money from commercial banks. D. The money market mutual fund industry is important because long-term debt is held by these institutions. If money market mutual funds have problems, can't savers just deposit their money in banks? A. Yes, they can, but doing so will severely impact the financial system because the funds make up a large fraction of the market for commercial paper and because many firms have become heavily dependent on sales of commercial paper to finance their operations. B. No, they cannot because if money market mutual funds have problems, legal restrictions limit the depositing of money in banks. C. Yes, they can, but the transaction costs will result in huge losses, thus making this a poor decision. D. No, they cannot because banks also invest in money market mutual fund shares and therefore have the same problems as the whole money market mutual fund industry. During the financial crisis, the U.S. Treasury implemented the Guarantee Program for Money Market Funds, which insured investors against losses on their existing money market mutual fund shares. In explaining the program, a Treasury statement noted that: "Maintaining confidence in the money market mutual fund industry was critical to protecting the integrity and stability of the global financial system." Source: U.S. Department of the Treasury, "Treasury Announces Expiration of Guarantee Program for Money Market Funds," September 18, 2009. Why is the money market mutual fund industry so important? A. The money market mutual fund industry is important because many firms rely on the access to commercial paper to meet payroll and other operating costs, and the elimination of this market would hurt access to this source of funding and have severe adverse consequences for the real economy. B. The money market mutual fund industry is not large enough to cause a severe impact on the entire financial system. C. The money market mutual fund industry is important because there is a high likelihood that the failure of the money market mutual fund industry would lead depositors to withdraw their money from commercial banks. D. The money market mutual fund industry is important because long-term debt is held by these institutions. If money market mutual funds have problems, can't savers just deposit their money in banks? A. Yes, they can, but doing so will severely impact the financial system because the funds make up a large fraction of the market for commercial paper and because many firms have become heavily dependent on sales of commercial paper to finance their operations. B. No, they cannot because if money market mutual funds have problems, legal restrictions limit the depositing of money in banks. C. Yes, they can, but the transaction costs will result in huge losses, thus making this a poor decision. D. No, they cannot because banks also invest in money market mutual fund shares and therefore have the same problems as the whole money market mutual fund industry. During the financial crisis, the U.S. Treasury implemented the Guarantee Program for Money Market Funds, which insured investors against losses on their existing money market mutual fund shares. In explaining the program, a Treasury statement noted that: "Maintaining confidence in the money market mutual fund industry was critical to protecting the integrity and stability of the global financial system." Source: U.S. Department of the Treasury, "Treasury Announces Expiration of Guarantee Program for Money Market Funds," September 18, 2009. Why is the money market mutual fund industry so important? A. The money market mutual fund industry is important because many firms rely on the access to commercial paper to meet payroll and other operating costs, and the elimination of this market would hurt access to this source of funding and have severe adverse consequences for the real economy. B. The money market mutual fund industry is not large enough to cause a severe impact on the entire financial system. C. The money market mutual fund industry is important because there is a high likelihood that the failure of the money market mutual fund industry would lead depositors to withdraw their money from commercial banks. D. The money market mutual fund industry is important because long-term debt is held by these institutions. If money market mutual funds have problems, can't savers just deposit their money in banks? A. Yes, they can, but doing so will severely impact the financial system because the funds make up a large fraction of the market for commercial paper and because many firms have become heavily dependent on sales of commercial paper to finance their operations. B. No, they cannot because if money market mutual funds have problems, legal restrictions limit the depositing of money in banks. C. Yes, they can, but the transaction costs will result in huge losses, thus making this a poor decision. D. No, they cannot because banks also invest in money market mutual fund shares and therefore have the same problems as the whole money market mutual fund industry. During the financial crisis, the U.S. Treasury implemented the Guarantee Program for Money Market Funds, which insured investors against losses on their existing money market mutual fund shares. In explaining the program, a Treasury statement noted that: "Maintaining confidence in the money market mutual fund industry was critical to protecting the integrity and stability of the global financial system." Source: U.S. Department of the Treasury, "Treasury Announces Expiration of Guarantee Program for Money Market Funds," September 18, 2009. Why is the money market mutual fund industry so important? A. The money market mutual fund industry is important because many firms rely on the access to commercial paper to meet payroll and other operating costs, and the elimination of this market would hurt access to this source of funding and have severe adverse consequences for the real economy. B. The money market mutual fund industry is not large enough to cause a severe impact on the entire financial system. C. The money market mutual fund industry is important because there is a high likelihood that the failure of the money market mutual fund industry would lead depositors to withdraw their money from commercial banks. D. The money market mutual fund industry is important because long-term debt is held by these institutions. If money market mutual funds have problems, can't savers just deposit their money in banks? A. Yes, they can, but doing so will severely impact the financial system because the funds make up a large fraction of the market for commercial paper and because many firms have become heavily dependent on sales of commercial paper to finance their operations. B. No, they cannot because if money market mutual funds have problems, legal restrictions limit the depositing of money in banks. C. Yes, they can, but the transaction costs will result in huge losses, thus making this a poor decision. D. No, they cannot because banks also invest in money market mutual fund shares and therefore have the same problems as the whole money market mutual fund industry. During the financial crisis, the U.S. Treasury implemented the Guarantee Program for Money Market Funds, which insured investors against losses on their existing money market mutual fund shares. In explaining the program, a Treasury statement noted that: "Maintaining confidence in the money market mutual fund industry was critical to protecting the integrity and stability of the global financial system." Source: U.S. Department of the Treasury, "Treasury Announces Expiration of Guarantee Program for Money Market Funds," September 18, 2009. Why is the money market mutual fund industry so important? A. The money market mutual fund industry is important because many firms rely on the access to commercial paper to meet payroll and other operating costs, and the elimination of this market would hurt access to this source of funding and have severe adverse consequences for the real economy. B. The money market mutual fund industry is not large enough to cause a severe impact on the entire financial system. C. The money market mutual fund industry is important because there is a high likelihood that the failure of the money market mutual fund industry would lead depositors to withdraw their money from commercial banks. D. The money market mutual fund industry is important because long-term debt is held by these institutions. A. The money market mutual fund industry is important because many firms rely on the access to commercial paper to meet payroll and other operating costs, and the elimination of this market would hurt access to this source of funding and have severe adverse consequences for the real economy. B. The money market mutual fund industry is not large enough to cause a severe impact on the entire financial system. C. The money market mutual fund industry is important because there is a high likelihood that the failure of the money market mutual fund industry would lead depositors to withdraw their money from commercial banks. D. The money market mutual fund industry is important because long-term debt is held by these institutions. A. The money market mutual fund industry is important because many firms rely on the access to commercial paper to meet payroll and other operating costs, and the elimination of this market would hurt access to this source of funding and have severe adverse consequences for the real economy. A. The money market mutual fund industry is important because many firms rely on the access to commercial paper to meet payroll and other operating costs, and the elimination of this market would hurt access to this source of funding and have severe adverse consequences for the real economy. The money market mutual fund industry is important because many firms rely on the access to commercial paper to meet payroll and other operating costs, and the elimination of this market would hurt access to this source of funding and have severe adverse consequences for the real economy. B. The money market mutual fund industry is not large enough to cause a severe impact on the entire financial system. B. The money market mutual fund industry is not large enough to cause a severe impact on the entire financial system. The money market mutual fund industry is not large enough to cause a severe impact on the entire financial system. C. The money market mutual fund industry is important because there is a high likelihood that the failure of the money market mutual fund industry would lead depositors to withdraw their money from commercial banks. C. The money market mutual fund industry is important because there is a high likelihood that the failure of the money market mutual fund industry would lead depositors to withdraw their money from commercial banks. The money market mutual fund industry is important because there is a high likelihood that the failure of the money market mutual fund industry would lead depositors to withdraw their money from commercial banks. D. The money market mutual fund industry is important because long-term debt is held by these institutions. D. The money market mutual fund industry is important because long-term debt is held by these institutions. The money market mutual fund industry is important because long-term debt is held by these institutions. If money market mutual funds have problems, can't savers just deposit their money in banks? A. Yes, they can, but doing so will severely impact the financial system because the funds make up a large fraction of the market for commercial paper and because many firms have become heavily dependent on sales of commercial paper to finance their operations. B. No, they cannot because if money market mutual funds have problems, legal restrictions limit the depositing of money in banks. C. Yes, they can, but the transaction costs will result in huge losses, thus making this a poor decision. D. No, they cannot because banks also invest in money market mutual fund shares and therefore have the same problems as the whole money market mutual fund industry. A. Yes, they can, but doing so will severely impact the financial system because the funds make up a large fraction of the market for commercial paper and because many firms have become heavily dependent on sales of commercial paper to finance their operations. B. No, they cannot because if money market mutual funds have problems, legal restrictions limit the depositing of money in banks. C. Yes, they can, but the transaction costs will result in huge losses, thus making this a poor decision. D. No, they cannot because banks also invest in money market mutual fund shares and therefore have the same problems as the whole money market mutual fund industry. A. Yes, they can, but doing so will severely impact the financial system because the funds make up a large fraction of the market for commercial paper and because many firms have become heavily dependent on sales of commercial paper to finance their operations. A. Yes, they can, but doing so will severely impact the financial system because the funds make up a large fraction of the market for commercial paper and because many firms have become heavily dependent on sales of commercial paper to finance their operations. Yes, they can, but doing so will severely impact the financial system because the funds make up a large fraction of the market for commercial paper and because many firms have become heavily dependent on sales of commercial paper to finance their operations. B. No, they cannot because if money market mutual funds have problems, legal restrictions limit the depositing of money in banks. B. No, they cannot because if money market mutual funds have problems, legal restrictions limit the depositing of money in banks. No, they cannot because if money market mutual funds have problems, legal restrictions limit the depositing of money in banks. C. Yes, they can, but the transaction costs will result in huge losses, thus making this a poor decision. C. Yes, they can, but the transaction costs will result in huge losses, thus making this a poor decision. Yes, they can, but the transaction costs will result in huge losses, thus making this a poor decision. D. No, they cannot because banks also invest in money market mutual fund shares and therefore have the same problems as the whole money market mutual fund industry. D. No, they cannot because banks also invest in money market mutual fund shares and therefore have the same problems as the whole money market mutual fund industry. No, they cannot because banks also invest in money market mutual fund shares and therefore have the same problems as the whole money market mutual fund industry.

Explanation / Answer

Why is the money market mutual fund industry so important?

A.

The money market mutual fund industry is important because many firms rely on the access to commercial paper to meet payroll and other operating costs, and the elimination of this market would hurt access to this source of funding and have severe adverse consequences for the real economy.

If money market mutual funds have problems, can't savers just deposit their money in banks?

A.

Yes, they can, but doing so will severely impact the financial system because the funds make up a large fraction of the market for commercial paper and because many firms have become heavily dependent on sales of commercial paper to finance their operations.

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