That is, financial institutions. Money market funds. Hedge funds.All said to themselves, these banks aren't as safe as we thought, we get our money out as soon as we can.
10% and inflation's at 10% where do you want to put your money in in the in the money market so deposits were flowing like a flood out of thesnls now here's the thing about government we could have let some snls
The more choices people have, even when you look at the people that actually chose to participate, the more choices they had, the more likely they were to put all their money in money market accounts. We all know that's a dumb decision.
In the market for potatoes, the price comes down and the excess supply disappears. In the money market , when we're caught in a crisis like this, the price of money comes down, and the problem gets worse. And the excess supply of money gets worse.
Typically, you're borrowing 300 basis points over the money market rate. So let's say the money market rate in Pakistan is 6%. Typically, microfinance will borrow at 9% to 10%.
It was unable to pay people back a dollar for every dollar they put in. It started a run on money market funds, people taking their money out, just the way that we used to have banking runs before we had the Federal Deposit Insurance Corporation. And that's a problem, because the industrial economy of America relies on these funds for their financing. And I think what will go down in history as
You mean putting it in a bank, just leaving it in a bank? In whatever form, a money market fund, a whatever it is that is that short-term of deposited and it'll give me an interest rate.
They grew and as you put in, central banks would give them support against collateral. The Shadow Banking system is filled with bright sunshine institutions-- money market funds, hedge funds.
market funds started, the run generally started on money market funds. And 30 million Americans had $3.5 trillion in the money market funds. But the linkage which we had not focused on was the money market funds were funding commercial paper, which
And 30 million Americans had $3.5 trillion in the money market funds. But the linkage which we had not focused on was the money market funds were funding commercial paper, which many of the biggest industrial companies used to meet their financing needs.
And treasury bonds at 5.5%. So, the realm of fixed income investing, which would include things like municipal bonds, money market funds, um corporate bonds, government bonds, all kinds of interest-bearing investments, for the most part, those investments are relatively low-risk and low-returning
But that week-- and so during that week after Lehman went down and where we went up for the TARP , the time when I saw it the clearest was when the money market funds started, the run generally started on money market funds. And 30 million Americans had $3.5 trillion in the money market funds.
And there are two things I think that they didn't appreciate -- call it a "failure of imagination," if you will. That turned out to be catastrophic. One was, we have these things called "money market mutual funds," where people put their money in, expect that their shares will always be worth a dollar. They get some interest. The money market mutual fund takes their money and buys IOUs from other companies, industrial companies -- General Electric, IBM, Caterpillar,
One was, we have these things called "money market mutual funds," where people put their money in, expect that their shares will always be worth a dollar. They get some interest. The money market mutual fund takes their money and buys IOUs from other companies, industrial companies -- General Electric, IBM, Caterpillar, places like that. That's sort of what banks used to do.
places like that. That's sort of what banks used to do. Now, a lot of it goes through money market mutual funds. The Fed and the Treasury thought, "Well, no money market mutual fund is stupid enough to hold Lehman IOU's, hold Lehman paper.” They were wrong -- a big one did.
There wasn't a will, they didn't do it, and the rest has become history, as they say. So, not only was there this money market fund problem, but this decision to let Lehman Brothers go stunned the rest of the world. A European central banker I know said to me a few weeks later, "In my country, we don't let dry cleaners fail.
adequacy is concerned. So it takes time for microfinance banks to reduce the cost of funds. Typically, you're borrowing 300 basis points over the money market rate. So let's say the money market rate in Pakistan is 6%.
for any reason. There can be some earthquake. There can be a bubble bursting in some subprime market, or in some particular money market . There are all sorts of different candidates to spearhead a degree of pessimism in a boisterous, dynamic, capitalist economy.
And within six months, it was $100 billion, US dollars, funds had gone into that account. And became, I think, the second largest money market fund in the world, overnight, pretty much. Because Chinese banks are products of the-- some of them are better, like China Merchants Bank.
Now, a lot of it goes through money market mutual funds. The Fed and the Treasury thought, "Well, no money market mutual fund is stupid enough to hold Lehman IOU's, hold Lehman paper.” They were wrong -- a big one did. It was unable to pay people back a dollar for every dollar they put in.
And that's a problem, because the industrial economy of America relies on these funds for their financing. And I think what will go down in history as one of the more successful rescues -- the Fed and Treasury rapidly put together a system to guarantee people's deposits in money market mutual funds so that too many people don't take their money out, and find a way to lend directly to companies so that they can keep financing, so while the housing market is going through the floor, we can have the rest
affordable and available so they thought well if if the SNL can only pay 5% maybe mortgage rates will only be 6 or 7% and that's great what happened during the 70s was well if this money market pays 10% and inflation's at 10% where do you want to put your money in in the in the
These things are all hard, right? Real estate business is hard, starting your own company is hard. Investing in other companies is hard. The conventional thing, the safe thing is I just put all my money in a money market and I get paid 3% and then after tax I've got 1.5% and the currency is losing 7% of its
So the 'bao'-- the idea is that people had this money sitting in their accounts, these Alipay accounts. And Jack said, well, why don't we just launch a money market fund? We'll give you 2% higher rates of interest than the banks.