Tuesday, October 21, 2008

Fed Announces Support Program for Money Market Mutual Funds

The Federal Reserve Board announced today the creation of the Money Market Investor Funding Facility (MMIFF), which will support a private-sector initiative designed to provide liquidity to U.S. money market investors.  The Fed said this morning that it will lend up to $540 billion to a series of special purpose vehicles to facilitate the purchase of eligible assets from eligible investors.

Under the MMIFF, eligible assets will include U.S. dollar-denominated certificates of deposit and commercial paper issued by highly rated financial institutions and having remaining maturities of 90 days or less.  Eligible investors will include U.S. money market mutual funds and over time may include other U.S. money market investors.

According to the Fed's press release, the MMIFF is part of its continuing efforts to try to keep cash flowing through the financial system:

The MMIFF complements the previously announced Commercial Paper Funding Facility (CPFF), which on October 27, 2008 will begin funding purchases of highly rated, U.S.-dollar denominated, three-month, unsecured and asset-backed commercial paper issued by U.S. issuers, as well as the Asset Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF), announced on September 19, 2008, which extends loans to banking organizations to purchase asset backed commercial paper from money market mutual funds. The AMLF, CPFF, and MMIFF are all intended to improve liquidity in short-term debt markets and thereby increase the availability of credit.

The full text of the Fed's press release is available at:  http://www.federalreserve.gov/newsevents/press/monetary/20081021a.htm

The term sheet describing the basic terms and operational details of the MMIFF is available at: