At least 21 money market mutual funds got support from their sponsoring companies to prevent their shares from falling during the past financial crisis, a report from the Federal Reserve Bank of Boston said.
The report, “The Stability of Prime Money Market Mutual Funds: Sponsor Support from 2007 to 2011,” found sponsoring companies had to step in to prevent the funds from “breaking the buck,” or falling below their stable $1 share values.
Boston Fed President Eric Rosengren, a former bank regulator, has focused in speeches this year on money funds as a potential threat to financial stability.
“The status quo is not acceptable,” he said in April. “Funds need to be structured so that neither sponsor support nor government support is likely or necessary, even during times of stress.”
Money-market fund companies obtained permission to support 155 of their funds during the financial turmoil of 2007 and 2008, and six more funds got the same go-ahead since the crisis, according to a list provided to Congress by the U.S. Securities and Exchange Commission.