Many large banks had to put up substantial sums to keep their money market funds from “breaking the buck”. Typically money market funds maintain a net $1.00 share price. If the underlying securities decline below a dollar per share then it is said to have “broken the buck.”

If allowed to drop below a dollar per share there would be a massive loss of confidence, since money market funds are supposed to be one of the safest and most stable financial vehicles the bansk offer.

The loss in the value of the underlying securities is from the banks carrying securities that are either too long or too risky. They expected to pocket the higher yield, but the drop in the market caught them off guard. They were smart to support the funds but it demonstrates an underlying malfeasence in the management of the funds.

What if it took 10 billion dollars instead of 2 billion dollars? Would they have been able to support the funds?

There are safer money market funds that only invest in government backed securities, but you will have to settle for a slightly smaller yield.

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