Money Market Investor Funding Facility (MMIFF)

What Was the Money Market Investor Funding Facility?

The Money Market Investor Funding Facility (MMIFF) was a financial entity made by the Federal Reserve during the financial crisis of 2008 to raise the liquidity accessible for money market investments.

Grasping the MMIFF

The Money Market Investor Funding Facility (MMIFF) existed from November 24, 2008, through October 30, 2009. During that time, the Federal Reserve Bank of New York authorized five special purpose vehicles (SPVs) to purchase up to $600 billion in short-term debt instruments from private-area financial institutions. Eligible assets included highly rated money market instruments with maturities somewhere in the range of seven and 90 days held in U.S. money market mutual funds and valued at something like $250,000.

The Federal Reserve Bank upheld the SPVs by crediting 90% of the purchase price of every asset to the SPVs, which issued asset-backed commercial paper to cover the remainder of the cost. As the debt matured, the MMIFF utilized the proceeds to repay both the Federal Reserve Bank and the MMIFF's outstanding ABCP debts. Funding from the SPVs upheld 50 designated financial institutions covering a broad geographic distribution and distinguished by industry leaders as high-quality issuers of short-term debt with which the money market funds previously carried on with work.

The Federal Reserve made these moves in response to liquidity fears among money market investors and mutual funds, which overflowed the short-term debt markets. By laying out the MMIFF, the Federal Reserve looked to extend secondary-market sales of medium-term instruments, for example, certificates of deposits, bank notes, and highly rated commercial paper.

Liquidity in Money Markets

Money market funds ordinarily address a stable, okay investment. They try to hold net asset value (NAV) of deposited funds at $1, yet since the Federal Deposit Insurance Corporation (FDIC) doesn't protect money market funds, investors can hypothetically lose money by investing in them. During the financial crisis of 2008, the collapse of Lehman Brothers drove one money market asset's NAV down to $0.97 in the wake of discounting debt. The United States Treasury in the long run stepped in to safeguard consumer protection for funds that fell underneath $1, fighting off a potential cash run.

Institutions careful about runs on their money market funds increased their liquidity positions by investing a greater amount of their holdings in exceptionally short-term assets, especially overnight positions. The Federal Reserve Bank laid out the MMIFF to offer extra wellsprings of liquidity to money market funds at longer spans. This assisted the funds with keeping up with fitting liquidity conditions while simultaneously alleviating the short-term debt markets from the strain put on them by the uncommonly high number of short-length investments seen from money market investors.