Issuers generally issued, and buyers generally were only willing to buy, overnight issues of commercial paper. Īt this point, the market for commercial paper became illiquid. Over the to 10/7/ 2008 time frame, government money market fund assets increased by $409 billion (44 percent) as prime fund assets fell by $498 billion (24 percent). Institutional government and retail government funds received large daily net inflow during this period. ĭuring the calendar week of the crisis institutional prime funds had large net outflow every day while retail prime funds had net outflow Wednesday through Friday. In addition, a number of money funds received sponsor support, by means of either capital infusion or purchase of discounted paper at book value, during this period. Over the next four days investors withdrew $23 billion and made redemption requests of $60 billion from the $62 billion dollar fund.
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On Tuesday, September 16, the Reserve Primary Fund, holding $785 million of defaulted Lehman Brothers commercial paper, announced that, due to the default, the net asset value of the money fund had broken the 1.00 net asset value mark and was now valued at 0.97. Investors began selling prime money market funds on Friday, September 12, and continued selling them on Monday, September 15. On September 15, Lehman Brothers, a global financial services firm, declared bankruptcy. On September 14, the Bank of America bought the insolvent Merrill Lynch brokerage. mortgage Government Sponsored Enterprises, Fannie Mae and Freddie Mac, were declared insolvent and placed in conservatorship. The 2008 financial crisis reached its climax during the month of September (see accompanying table for a timeline of September events). Intervention by the Federal Reserve, first with a bridge loan to the firm, and then with an arranged merger/acquisition of the firm by JPMorgan Chase and Co. In March 2008, Bear Stearns, a global investment bank and securities trading and brokerage firm, became insolvent. įinancial difficulties continued into the spring of 2008, with the failure of auctions for auction-rate securities. These actions resulted in lower demand for asset-backed commercial paper and a movement of institutional money from unregulated liquidity pools to money market funds. On Augthe French bank BNP Paribas halted withdrawals from its three investment funds and suspended calculation of their net asset values. Additional problems with subprime mortgages surfaced in August as two Bear Stearns’s hedge funds filed for bankruptcy, and a third Bear Stearns’s hedge fund suspended investors’ redemptions.
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These defaults included Cheyne Finance and Axon SIV. In August 2007, widening spreads in the commercial paper market, combined with mortgage security losses, resulted in the default of several structured investment vehicles. ĩ/12 Moody's and S&P downgrade Washington Mutual ĩ/14 Bank of America agrees to buy Merrill Lynch ĩ/16 Reserve Primary Fund breaks the buck ĩ/17 Federal Reserve lends to AIG for 79.9% company ownership ĩ/17 Barclays buys Lehman's North American operations ĩ/19 AMLF announces Treasury guarantees $1 NAV ĩ/19 SEC issues temporary ban on short selling financial issues ĩ/21 Goldman Sachs and Morgan Stanley convert to bank holding company status ĩ/24 Central banks coordinate currency swap facility ĩ/25 Ireland becomes first Eurozone country to announce recession ĩ/26 JP Morgan Chase purchases Washington Mutual ĩ/28 Congress approves $700 billion financial rescue plan ĩ/29 Citigroup purchases Wachovia assets ĩ/29 Global central banks inject credit market liquidity
#Best performing mutual funds in 2007 and 2008 mac#
Historical background September 2008 Timeline ĩ/7 Fannie Mae and Freddie Mac placed in conservatorship ĩ/10 Korean Development Bank ends investment talks with Lehman Brothers.