The dangers of money market funds

The Indicator from Planet Money

NPR

Business

4.7 • 9.2K Ratings

🗓️ 25 May 2023

⏱️ 9 minutes

🔗️ Recording | iTunes | RSS

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Summary

Money market funds are a key aspect of the financial system and hold about $5.75 trillion of assets. Today, we explain what makes up a money market fund, why they've been looking shaky lately, and why a potential debt default is making things worse.

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Transcript

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0:00.0	NPR.
0:07.0	This is the Indicated for Planet Money, I'm Adrienne Ma.
0:14.5	And I'm Whalen Wong.
0:15.8	Back in March, US Treasury Secretary Janet Yellen won a Lifetime Achievement Award from
0:20.4	a group of economists.
0:22.0	In her acceptance speech, she talked about the stability of the financial system.
0:26.4	This is a pretty hot topic given that Silicon Valley Bank and Signature Bank had collapsed
0:30.8	earlier that month.
0:31.8	And if there's any place with vulnerabilities of the system to runs and fire sales have
0:39.0	been clear cut.
0:40.6	What you're going to say, regional banks?
0:43.7	It is money market funds.
0:45.5	Oh, Janet Yellen, she stumped you, Adrienne.
0:48.2	Money market funds.
0:49.8	They are not banks, but they do hold a lot of money.
0:53.2	$5.75 trillion in assets.
0:57.0	Money market funds are a huge piece of the financial system.
1:00.0	That, like Janet Yellen warned, have some vulnerabilities.
1:03.2	Yeah, and between a recent string of failed banks and also a possible US debt default,
1:09.7	there is a reason to worry about the stability of money market funds.
1:13.9	So today on the show, we explain how these funds work, where the dangers are, and how
1:19.5	the government wants to try and make them safer.
	...

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