Asset-Backed Commercial Paper Money Market Fund Liquidity Facility - AMLF
It sounds like a Tom Wolfe book, a la The Electric Kool-Aid Acid Test or The Kandy-Kolored Tangerine-Flake Streamline Baby. Only this time set in the world's most boring subculture.
Actually, far from being boring (for a financial organization), the AMLF (as it's commonly called) came about during one of the most fraught periods in Wall Street history. It was created during the financial crisis as one of the programs governmental agencies put into place in order to unfreeze markets and prevent a full-scale deterioration of the financial system.
At the time (the AMLF was announced in September of 2008), money market mutual funds, a commonly-used short-term investment vehicle, were having trouble meeting requests for withdrawals. Investors were desperately trying to get cash amid the (figurative) burning ashes of Wall Street, meaning that they were pulling funds out of money market accounts. Meanwhile, other markets were frozen by the financial crisis, leading to a situation where the funds themselves were having trouble selling assets.
The AMLF was put in place to solve this impasse. It remained in place for about a year and a half, eventually winding down in February of 2010. According to the Federal Reserve, which set up the program, the AMLF repaid all its loans in full, with interest.
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Finance: What is a Money Market Fund?80 Views
finance a la shmoop. what is a money market fund? isn't it a strange concept
to think about going to a market to buy money? [man walks through grocery store]
well yeah it's strange but the practice exists and it's a huge multi trillion
dollar market today. the key word here is money and not investment. why such a big
diff? well because the notion of investing implies duration. that is when
you invest in a nice fixer-upper home or a tractor distribution company or shares
in a fat dividend-paying bank you're investing for presumably a long time [people stand in line]
like years maybe decades maybe centuries if you can find the right miracle pill.
but here we're talking about money like the stuff you can buy candy with. so it's
short term not long and a money market fund basically comprises many series of
pretty safe bonds that are all coming due in the next 30 to 90 days. sometimes [pie chart]
longer than that sometimes shorter but generally in the very near future. so why
would you care about a money market fund? well because it pays you slightly more
interest on your money than say a bank checking account. and lots of people in
corporations need cash just sitting around to pay their bills, so there are
tons of money market funds out there available and that's the gist of a money
market fund. we're sure you'll have plenty of experience with them by the
time you hit your sixth hundredth birthday day [people cheer and hold birthday cake]
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