Federal Reserve to Provide Emergency Loans to Money Market Funds

Federal Reserve
BRENDAN SMIALOWSKI/AFP/Getty Images

The Federal Reserve said Wednesday night that would begin providing support to money market mutual funds, the savings vehicles many Americans use to store cash.

The Fed said it would launch a Money Market Mutual Fund Liquidity Facility that would make emergency loans to money market mutual funds. The facility will be backed by $10 billion from the Treasury Department.

The point of the emergency loans is to allow money market funds to meet demands for redemptions from investors without having to engage in firesales of assets they hold.

“Money market funds are common investment tools for families, businesses, and a range of companies,” the Fed said late Wednesday night. “The MMLF will assist money market funds in meeting demands for redemptions by households and other investors, enhancing overall market functioning and credit provision to the broader economy.”

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