Money Market Funds: Collapse, Run, and Guarantee

On the night of Sunday, September 14, 2008, word leaked that the rescue of Lehman Brothers had failed and that a bankruptcy filing was inevitable. The fallout would turn out to be vast, posing a systemic risk to the financial system. Caught up in the maelstrom was a part of the financial industry otherwise thought to be healthy: the money market fund complex. The Reserve Primary Fund, the oldest money market fund in existence, with nearly $63 billion in assets, held approximately $785 million of Lehman commercial paper, or about 1.2 percent of its net assets.¹ Commercial paper is a